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Tools and tips for managing your finances

How Identity Theft Can Affect Your Credit Score

Learn more about the potential impacts of credit card fraud and what to do about it.

Do One Thing: If you suspect you (or a loved one) have been the victim of identity theft, check your credit reports, immediately. You can get a free copy every week at www.annualcreditreport.com. Report suspicious activity to all three reporting agencies: Equifax, TransUnion, and Experian.

Identity Theft is on the Rise

The number of people reporting identity theft in the U.S. has surged in recent years, with credit card fraud topping the list, notes the Federal Trade Commission (FTC). In 2023, some 426,000 cases of credit card fraud were reported to the FTC. And while that number is down 5% from the previous year, it’s still more than 53% higher than 2019, when just 278,000 cases were reported.

Plus, the total number of credit card fraud incidents is likely underreported, experts say, so the true number of victims is potentially much higher. 

Identity theft can come with a litany of challenges, including damage to your credit score. How’s that? If a thief applies for new credit in your name, that leads to a hard inquiry on your credit report. 

Your credit score, of course, is based on information in your credit report and each hard inquiry takes it down at least a few notches. 

Upping Utilization 

“If an unauthorized charge increased a balance on your account, and that increased balance was reported to a credit reporting agency, this can (also) impact your score,” notes Margaret Poe, head of consumer credit education at TransUnion. “That’s because your credit utilization ratio, which measures how much of your total credit limit you’re using, is an important credit score factor.”

The higher your ratio, the more it negatively impacts your score.

Report Identity Theft 

“There are several steps you can take if you’ve been a victim of identity theft,” says Poe. First, notify the company where the unauthorized charges occurred, or where the inquiry originated. Their contact information should be on your credit report. 

These days, many financial institutions have a dedicated fraud department you can contact to help manage your account and investigate unauthorized charges. It’s important to note that finding unauthorized charges on a credit card – or in one of your financial accounts – doesn’t necessarily mean someone has access to other important data that would allow them to open credit in your name. 

Freeze Accounts For Free 

Still, it’s better to play it safe. “Inquiries you don’t recognize can indicate they do have that valuable data,” Poe notes. “Consider placing a free credit freeze with each of the three nationwide credit reporting agencies (TransUnion, Equifax, Experian) to help prevent fraudsters from opening new accounts in your name.”

While contacting the agencies online is quick and convenient, you can also call them.

You can reach the bureaus at the following numbers:

  • Equifax at (888) 298-0045
  • TransUnion at (888) 909-8872
  • Experian at (888) 397-3742.

By law, the credit bureaus must put a freeze in place within one business day of a request. When asking for a credit freeze to be lifted (by phone or online) the credit bureaus are required to do so within one hour. Note: The agencies have up to three business days to act when requests are made by mail. 

Dispute Errors & Contact Authorities 

Identity theft and credit card fraud are crimes and should be treated as such. Victims should file a report with the Federal Trade Commission and contact their local law enforcement agency.

“TransUnion can block fraudulent information from your credit report,” says Poe, “if you send a valid identity theft report, proof of your identity, and a letter that identifies the fraudulent information on your credit report.”

Poe’s pro tip: Keep records of your communications with all parties throughout the recovery process. Be sure to follow up with companies you’ve been in contact with as they investigate your fraud claims.

Calendar More Frequent Check-ins 

While there’s no specific rule of thumb regarding how often someone should check their credit report Poe says, those with specific goals would do well to review them more frequently: “You should check your report regularly – once a year at a minimum – but more often if you are working to build your credit, make a major purchase, or have been a victim of fraud.”
Remember, you can get a free copy of your credit reports every week at www.annualcreditreport.com. Those who use the SavvyMoney tool have free daily access to their credit score and full credit report.

First published Jean Chatzky and our partners at SavvyMoney.com

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