The Impact of Identity Theft on Your Credit Score

Published on Mar 03, 2014 11:18 am

According to the Wall Street Journal, three percent of Americans suffer from identity fraud every year. If you’re one of the millions of people whose identity has been stolen, it can have far-reaching consequences. You could end up being denied for a loan or insurance policy, have your credit damaged or even end up in legal trouble. Luckily, the damage that identity fraud does to your credit can be addressed.

Understanding Identity Theft

Identity theft can go well beyond having your credit card number stolen and used for purchases. It is an unfortunate event that all starts with one common denominator – your personal information. Armed with data like your name, address, date of birth and Social Security number, an identity thief can do just about anything. He can access – and empty out – your bank accounts, max out your credit cards, apply for new accounts or even get access to your health insurance to get medical care under your name.

Credit Score Impacts

Identity thieves can hurt your credit in numerous ways. Frequently, they open up new accounts, which results in unauthorized inquiries showing up when you check your credit report. Additionally, the new accounts can reduce the average life of your credit accounts. When they max out your existing cards, the amount of debt you owe increases and your credit utilization goes up, also potentially harming your score. And the worst damage may come when a thief uses your credit to open a new account and doesn’t pay off his charges. This harms the payment history, and that’s part of what makes up your credit score. If you have a strong credit score, a late payment can impact it, so an identity thief can cause real damage.

Fixing the Problem

The good news is that when you get your credit report and score checked, if you find suspicious activity, there are steps you can take to mitigate the damage of identity theft. This means that you have the right to dispute any erroneous or fraudulent information. If you view your credit report and see accounts that you didn’t open, work with the credit bureau and with the business that reported the account to have it removed. Cleaning up identity theft isn’t easy, but, in the long run, you should be able to reverse the damage to your financial reputation.

Preventing Identity Theft

Instead of having to clean up after identity theft, you can reduce the risk of it happening in the first place. This starts online by locking your mobile devices and not entering your information on web pages that get emailed to you. Keeping your Social Security number out of your wallet can protect you if you get pick-pocketed or misplace your wallet. Shredding mail and other documents with your sensitive information can help to protect you from identity thieves who target garbage or recycling. Finally, checking your credit report may help you nip identity theft in the bud if it does occur because it will help you detect and handle instances of identity theft quickly.

About the Author
Solomon Poretsky has been a writer since 1996, with experience in the fields of financial services, real estate and technology. Poretsky holds a Bachelor of Arts in political science from Columbia University.

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from, Inc., an Experian company.   © 2014, Inc.  All rights reserved.

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