We are all aware of how important having a good credit score is – it’s not only important for large purchases or loans but can also affect your employment chances, rental or house-buying opportunities, and insurance prices.
In theory, if you are the victim of identity theft, a practice which is becoming more and more common, your credit shouldn’t be damaged. However, there are short-term impacts that may lower your credit score by as much as 100 points. In addition, it may take months to regain them. Below are some ways that identity theft can impact your score.
Having higher balances on accounts you have now
One of the most common types of identity theft is a credit card being used without the owner’s knowledge. A Department of Justice report recently stated that over 5 million credit card owners were affected by this type of theft.
It often takes a while for a cardholder to realize the card it being used, especially if it’s not a card you use frequently. If it’s used and it close to its limit, this could have a dramatically negative impact on the card, maybe even dropping a FICO score by 45 points. Keep a regular check on your credit accounts-even if you don’t often use them and report any suspicious activity. The sooner you report it, the quicker your credit scores will remain unaffected.
Having new accounts added
Many identity thieves use your information to open new credit card and other financial accounts; these accounts will show up on your credit reports. The problem with this is that new accounts will result in a small drop in your credit score. Even if the thief pays these account punctually, which most thieves won’t, your credit score will still be affected just because they have been opened and added to your score.
Payments that are late
If the identify thief has opened up a new account, the odds are that they will not pay it on time- or at all. The usual pattern is that someone who has used your identity to open account will make a few token payments and then stop paying, which will severely damage your credit score. Even one payment that is 30 days late may result in a 20-point drop in your score.
Debts that go to collections
It is likely that a thief will not pay bills on a fraudulent account, which means after six to 12 months, they will be turned over to a collection agency. For example, a thief uses a credit card on an account opened with your information, purchases goods and services, and never makes payments. This debt will be sent to a collection agency and will be reported on your credit report, which again, damages your score.