What Does Identity Theft Do to Your Credit History?

What Does Identity Theft Do to Your Credit History?

You know identity theft isn’t something you want to experience. Your thief can drag your financial good name through the mud and impact your family’s chances of getting a personal loan or line of credit in the future.

But why? While news of identity theft and big data breaches fill the headlines, the nitty-gritty of fraud rarely gets the spotlight. To find out how identity theft may impact your credit score, keep scrolling. Here are three possible effects of fraud:

1. A Spotty Payment History

Payment history is all about showing future financial institutions you’re responsible with money. Paying bills on time goes a long way to prove you’ll pay your future bills on time, too.

It’s also just a good money management tip. Not only does it add positive entries to your consumer file, but it also saves you from paying late fines and extra interest charges.

But you probably already knew that — which is why you try to be prompt with every payment.

Your thief, on the other hand, doesn’t share the same priorities. Once they borrow money, they’re probably not going to pay it back at all.

Late payments add negative payment history to your file, which may impact your report negatively. Even just one missed payment can slash your score by 110 points!

2. Maxed Out Limits

If your thief gets a handle on revolving accounts like a line of credit or credit card, they won’t use your limits wisely. Odds are they’ll try to max them out as soon as they can to avoid detection.

A high balance doesn’t bode well for your score. It impacts your credit utilization rate, which shows how much of your available limit you use, expressed as a percentage.

Normally, you’ll want to keep this rate below 30 percent. This shows financial institutions you aren’t dipping into these accounts often. And when you do, you’re paying off as much of the balance as possible.

Anything higher than 30 puts your ability to budget into question; it means you aren’t paying off these accounts after you use them.

If a thief takes your card to the limit, your score may drop by as much as 45 points.

3. New Accounts

When it comes to your report, older is better. An older file tends to give scoring models more data to work with when assessing your creditworthiness. As long as this data shows you keep your accounts in good standing, it can go a long way to building positive history.

It also inducts you in an exclusive club. Members of the 800 club (those with scores 800 and above) typically have histories that go back around 25 years.

Should a thief frantically open several new accounts in your name, their applications may shorten the average age of your accounts. This coupled with negative payment history may end up impacting your history negatively.

Negatively — now that’s not a word you want to see applied to your consumer file. Not when it has so much influence on your life, impacting not just your chances of getting a personal loan or line of credit, but also things like auto insurance, a new rental apartment, or even a job.

If you suspect you’re a victim of identity theft, act fast. Get in touch with one of the reporting agencies right away to stop your thief from potentially tanking your finances.