Have you ever opened your credit card statement and seen a charge you don’t recognize? Did you feel your stomach drop and instantly panic? This is a normal response when we think our credit card info may have been compromised. Oftentimes, these are legitimate charges that we just don’t recognize at first. However, fraud is very common and doesn’t always have a pleasant outcome. Now, imagine opening your credit report and seeing lines of credit opened in your name that you aren’t aware of. This is the first warning sign of identity theft and should be taken very seriously. Our credit report is the most important barometer of our overall financial health. How do fraudulent credit entries affect credit score? It’s important to understand the possible ramifications of identity theft so that you know how imperative it is to keep your information protected.
How do fraudulent credit entries affect credit score?
To start, you should know how what factors affect credit score in general.
- 35% Payment History
- 30% Amounts Owed
- 15% Length of Credit History
- 10% Type of Credit
- 10% New Credit
Now, let’s think about how often you check your credit report. Monthly? Yearly? Ever? Keep in mind, checking your credit score is not the same as checking your credit report. A credit report must be requested from one of the three major credit bureaus, Experian, Equifax or TransUnion. Hypothetically, let us say that you check your credit report every year. If your identity was stolen in January and accounts were opened in your name, what if you didn’t review your credit report until December?
Knowing that payment history makes up 35% of your credit score, and you have accounts that haven’t been paid for almost a year, your credit score will be taking a nosedive. Your amounts owed would increase. The amount of new credit would bring down your score. To say the least, it would be very detrimental to your credit score (not to mention, you may be on the hook for these payments as well as any legal ramifications that may result).
How do I reduce the damage if I should become a victim?
- Check your credit report several times a year. You are entitled to one free credit report from each of the credit bureaus per year. If you spread these out throughout the year, you will be able to spot any shady activity much faster. You can also pay for credit reports if you wish to check more frequently. The faster you identify fraudulent activity, the better.
- Contact your financial institutions immediately. When you discover that your identity has been compromised, you must act quickly. The faster you notify the appropriate entities, the faster the issue can be resolved. The faster issues are resolved, the faster your credit score will begin to rebound.
- Subscribe to an identity theft restoration service. If you become a victim of identity theft, it will be hard to discover just how far the damage reaches. If you sign up with an identity theft restoration service prior to becoming a victim, you will leave all of the hard work to people who take care of these issues every day. Identity theft related stress can be extremely hard on your body and mind. Resolving identity theft can take hundreds of hours. Wouldn’t you like to have the peace of mind, knowing that someone has your back?
Your credit score is the key to your financial future. How do fraudulent credit entries affect credit score? We hope you now have a solid understanding of how they do.