Home > Identity Theft > Four Ways Identity Theft Can Affect Your Credit

Comments 11 Comments

4 Ways Identity Theft Can Affect Your CreditIf you’ve been a victim of identity theft then you know how much work it can take to clear your name. In theory, identity theft should not have an ongoing impact on your credit reports or scores. But the reality can be much different.

“Long term, there should be no damage to your credit from ID theft,” says Barry Paperno, community manager for Credit.com. “But in the short run, you could lose more than 100 points from your score and not regain all of them until after the fraudulent credit information is removed from your credit report, which could take weeks, and in some complex cases even months.”

Consumer law attorney Robert Brennan, who represents consumers who have been victims of identity theft, agrees; adding “Identity theft hurts your credit in several ways, both known and unknown to the average consumer.”

Here are the top four ways identity theft immediately impacts your credit:

Higher balances on existing accounts

The fastest growing type of identity theft reported in 2010 involved the use or misuse of an existing credit account, according to a report by the Department of Justice. Approximately 5.5 million households were affected by this type of fraud that year.

If you aren’t monitoring your accounts closely, you may not catch a sudden increase in the balance on your credit cards. Unfortunately, though, credit card balances that are close to the limits can have a significant impact on your credit scores. “High credit utilization (balance/credit limit) can drop a high FICO score (780+) by as much as 45 points,” explains Paperno.

The good news here is that once those new charges are successfully disputed, your credit scores should no longer be impacted by those fraudulent charges.

New accounts

When a crook uses your personal information to open a new account, that account will typically appear on your credit reports. “Any new account added to your credit report can cause a slight drop in your score,” says Paperno. Even if those accounts were paid on time, they would have an impact on your credit scores.

But they usually aren’t.

Late payments

Some consumers don’t learn that their information has been compromised until after the damage has been done. In this not-uncommon scenario, the thief opens new accounts, makes purchases, and pays the bills for a little while, then bails. “The identity thief will often crash the consumer’s credit score by not making payments on the fraudulent account,” says Brennan.

The damage can be severe. “Even a minor delinquency, such as a 30-day late, can cause a high FICO score (780+) to lose as much as 100 points,” Paperno warns.


Every time the scammer applies for credit using another consumer’s personal information, that “inquiry” is recorded on the victim’s credit report. While multiple inquiries don’t typically have a significant impact on one’s credit scores, they can add up.

And that can be hard to clear up. Brennan explains:

When a consumer applies for credit, he or she gets “hard inquiries” on their credit reports, which themselves can depress credit scores because credit scoring models consider “hard inquiries” to be a signal that a consumer is shopping for credit. Identity thieves applying for credit can produce the same hard inquiries on a consumer’s credit report, which in turn will depress credit scores. When a victim of identity theft is cleaning up their credit, not only must they clean up the fraudulent tradelines—the records of payments on credit accounts—but they must also clean up the “hard inquiries” to make sure that any that have been made by identity thieves are removed.

You Have Rights

The Fair Credit Reporting Act, the law that regulates credit reports, requires credit reporting agencies to block information on credit reports due to fraud. Specifically, it says:

§ 605B. Block of information resulting from identity theft [15 U.S.C. §1681c-2]

(a) Block. Except as otherwise provided in this section, a consumer reporting agency shall block the reporting of any information in the file of a consumer that the consumer identifies as information that resulted from an alleged identity theft, no later than 4 business days after the date of receipt by such agency of —

(1) appropriate proof of the identity of the consumer;

(2) a copy of an identity theft report;

(3) the identification of such information by the consumer; and

(4) a statement by the consumer that the information is not information relating to any transaction by the consumer.

That’s one good reason to monitor your credit reports and investigate suspicious activity immediately. Act quickly and hopefully the problems created by identity theft will be gone before any long-term damage is done.

Image: Dan4th Nicholas, via Flickr

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • Hl

    Hi, i am a victim of id theft, my credit score dropped more than a 100 because of the negative account that the bank reported to my credit bureaus. It says that i have late payments. I have reported it to fraud department but it took 4 months and still the case is in progress. Should i be making the payment until they reverse the case? (All the balance in my acc was fraud) do you think that after they reverse the case from credit bureaus, the score will go up 100points?

    • http://www.Credit.com/ Gerri Detweiler

      Not sure what you mean when you say you reported it to the fraud department? Have you file a police report and filed an id theft report with the credit reporting agencies?

      • Hl

        I have called the bank they transfer my case to fraud department, i did file a police report and Reported 3 credit bureaus to monitor it for 90 days. But the question is should i make a payment so that i will have no late fee that make my score dropped? And wait until they solve n reverse the negative account and the bank will refund the money?

        • http://www.Credit.com/ Gerri Detweiler

          If there are charges that are not fraudulent you should continue to pay those. But otherwise I don’t see why you would make payments unless I am missing something. And why is this on your credit reports if it is fraudulent? Something doesn’t sound right here. Have you disputed the late payments with the credit reporting agencies and included a copy of your police report?

          • Hl

            There was some misunderstood, i sent form to them but they didnt recieve it and they said they didnt hear from me so they said i have to be reaponsible for this, i am really stress with how the fraud department work, i dont know what to do, they just ask me to wait because the form they havent recieve it yet. They really handle my case very poorly. Thank you for your advise.

          • http://www.Credit.com/ Gerri Detweiler

            If you can’t get this resolved I suggest you file a complaint with the Consumer Financial Protection Bureau or consider talking with a consumer protection attorney. Hope it gets resolved soon!

          • Hl

            Im glad that i have discussed this matter with you, now i know what to do if they cant resolve my issue. Thank you so much for your help.

          • http://www.Credit.com/ Gerri Detweiler

            You are welcome. Don’t give up. Let us know what happens.

  • Pingback: Moving can increase risk of identity theft()

  • http://www.credit.com/ Credit.com Credit Experts

    Cindy —
    I’m not quite clear on what you mean. Your credit reports are basically credit histories; they don’t include a score. Credit scores are three-digit numbers that are calculated based on the information in your credit reports. But if you mean that your credit reports have inaccurate information, you can — and should — dispute it. Here are some resources from Credit.com that you may find useful:

    How to Dispute an Error on Your Credit Report

    Credit Reports vs. Credit Scores: What’s the Difference?

    4 Credit Card Mistakes That Might Be Damaging Your Score

    • may

      My mom have credit cards in my name,its been 14 years ago, can she pay back that money with out going to jail, my credit is bad.

      • http://www.credit.com/ Credit.com Credit Experts

        Is this for charges made 14 years ago? Or current charges? (If charges are old, the debts are almost certainly uncollectable; if charges are recent, on a card that is in your name, that’s a different story. (See Does Your Old Debt Have an Expiration Date?)But nobody is going to send her to jail for repaying a debt. But please close any cards that are in your name and should not be.

  • Pingback: Wells Fargo Funded 22% of New Mortgages ← WORLD NEWS()

  • Pingback: The Danger of Not Checking Your Credit Report ‹ 1st Financial Center Scam()

  • Pingback: The Dangers of Not Checking Your Credit Report | Credit.com News + Advice()

  • Pingback: 6 Ways to Make Your Credit Score Less Scary | ComparePlastic()

  • Pingback: Four Ways Identity Theft Can Affect Your Credit | Wordpress Real Estate 7()

  • Pingback: Four Ways Identity Theft Can Affect Your Credit()

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team