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Credit Scores and Identity Theft: How Each Impacts the Other

Photo Credit: iStock/wutwhanfoto

Your credit score is the one constant used to determine whether you’re approved for a loan – and to set interest and premium rates for credit cards, homeowners and auto insurance, even deposits for new utility service. But that three-digit score itself may frequently change.

It’s typical for your score to fluctuate by a few points, based on spending and payment at any given time, information in your credit report (which is constantly being updated), even the passage of time.

But a larger, unexpected drop can signal identity theft – and identity theft can certainly devastate a score, at least in the short term. Although there are many credit scoring providers, each using a slightly different formula (just as your credit report may vary depending on the credit reporting bureau), here are some general guidelines on how ID theft can impact your credit score:

So along with getting those free credit reports that detail your credit history at annualcreditreport.com, it’s wise to keep tabs on your credit score – even if you have no plans to apply for new loans or plastic. (Credit scores are not included in the free reports, which are available from each of the three major reporting agencies once per 12-month period.)

Banks and credit card companies may provide customers with free scores on request, often each month. You can also try websites such as creditkarma.com, mint.com, creditsesame.com and quizzle.com; the trade-off is that you’ll receive promotional emails for products such as credit cards and loans that generate those websites a revenue share for customer enrollment. (So don’t use your primary email account unless you want a lot of spam.) But beware of “free” credit score scams. If a huge drop in your score raises your fraud antenna or you discover bogus accounts in your name, follow this recovery plan from the Federal Trade Commission.

For information about other scams, sign up for the Fraud Watch Network. You’ll receive free email alerts with tips and resources to help you spot and avoid identity theft and fraud, and gain access to a network of experts, law enforcement and people in your community who will keep you up to date on the latest scams in your area.