Are you the victim of identity theft? You’re not alone. According to Experian, credit card fraud is one of the most common forms of identity theft. In 2017 alone over 133,000 reports were filed, an increase of 23% over the year before, and the rates are only expected to go up. Your credit score reflects your overall habits when it comes to credit card use. If someone gets a hold of your information with malicious intent, the impact on your credit can be devastating and the recovery can be slow.
If a credit card is compromised, a criminal will run up expenses in the blink of an eye. When a criminal has information on your identity, such as your Social Security number, they can easily open a new account in your name and run up credit card or medical debt. Maxing out cards, failing to make payments, and applying for new credit can drop your credit score significantly.
Identity theft impacts your credit score on several levels, all of which are fundamental to how it is calculated:
How Identity Theft Affects Credit Score
1. Payment History
Making on-time payments is the most significant factor, and accounts for 35% of your credit score. Missing a payment by more than 30 days can cause a 100-point drop. An identity thief that uses your credit is most likely not going to pay the bills. However, you’re not responsible for paying back fraudulent charges. But even if you report credit card fraud immediately, it can take weeks to have these charges removed, all the while missed payments show up on your credit report and your credit score takes a hit.
2. Credit Utilization
The amount of debt you have accounts for 30% of your credit score. Credit utilization factors what you’ve paid on an account, the original balance, and the total amount of debt you have. Although it’s ideal to keep your utilization below 30%— you don’t have control when a thief has your credit card number. Typically, an identity thief will run up balances as fast as they can, before they are caught. This increases utilization quickly, but this is resolved once the fraudulent charges are removed.
3. Length of Credit History
About 15% of your credit score has to do with the age of your credit. It factors in your oldest account and average age of accounts. Credit scores go up the longer your credit history is. Identity theft can result in having multiple accounts opened at a time. This shortens the average age of your credit accounts, resulting in a negative impact. Your credit score will recover over time once any fraudulent accounts are closed.
4. Credit Inquiries
The number of hard inquiries impacts 10% of your credit score. There shouldn’t be more than one or two on your credit report at a time. But if many are reported at once, your credit score can drop. Hard credit inquires have a lingering effect for 12 months and stay on your credit report for 24 months. Identity thieves rarely stop at opening just one credit card. But even after the fraudulent accounts have been removed, hard inquiries will still be there until you dispute them directly with the credit bureaus.
Another factor in your credit score, credit mix, is usually not affected by identity theft. A good mix of credit consists of revolving credit card accounts and installment loans. It has a positive impact on your credit score, but accounts for only 10% of it.
Have You Had Your Identity Stolen? Contact American Credit
Missed payments, delinquencies, and identity theft can hurt your credit. If you have negative information on your credit report that’s hurting your credit score, American Credit provides an effective credit repair solution. As an alternative to the dispute letter process, we employ a pre-litigation process to achieve a higher success rate. Don’t wait. Contact us at 855-816-8819 for a free credit consultation and get on track to improving your credit.