There's a downside to high credit scores: identity theft.
The most creditworthy consumers are far more likely to be the victims of identity theft, according to a study released this week by credit reporting agency Experian. The top 20% of borrowers, in terms of credit scores, accounted for nearly half of all identity theft cases.
"It was surprising, the number of cases in the higher score bands," said Heather Grover, the head of Experian's fraud and identity-solutions division. "These are the folks that are rarely turned down for credit."
Grover's team examined about 800,000 fraud cases reported in 2007 and 2008. They parsed the data by victims' VantageScores, a credit-scoring system meant to rival the well-known FICO scores.
The top 20% of borrowers -- those with VantageScore ratings of 815 and above on the 501-to-990 scale -- were the victims of 48% of all self-reported identity theft cases. Consumers with average to very good credit -- those with scores between 762 and 814 -- accounted for an additional 13% of cases. Everyone else accounted for less than half of cases, with those in the lowest 20% making up just 4% of cases.
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Instead, she said, banks are simply more likely to grant loans and issue new credit cards when a person has good scores. So, when thieves apply for a card under the name of someone with good scores, they get the card and begin stealing. When they apply for a card under the name of a person with poor scores, they're more likely to be turned down.
"Our data doesn't necessarily dictate that consumers with higher credit scores are being targeted, only that there is a greater occurrence of fraud," said Grover.
The impact of identity theft
Identity theft can inflict permanent financial damage far greater than the amount of money fraudulently charged on a credit card, the most common crime associated with identity theft.Though law limits victim liability for fraudulent charges, it can take considerable cash to undo the damage to your name. Typically, victims spend between $739 and $951 on police reports, photocopies and other expenses related to proving they are victims of identity fraud, according to a May study by the Identity Theft Resource Center, a group that monitors the financial impact of such crimes.
That's not to mention the higher interest rates victims can pay while trying to convince credit ratings agencies that the unpaid bills were fraudulent.
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Stop identity theft coldMSN Money personal-finance columnist Liz Pulliam Weston explains how consumers can easily protect themselves from identity thieves and related financial fraud.
- Seek and destroy. Monitor your monthly bills for errant charges and destroy all paperwork associated with financial information.
- Don't trust telemarketers or e-mails from unknown sources. Fraudsters often pose as people from legitimate companies seeking your information to correct, say, a PayPal dispute. The process is so common it even has a cutesy name: phishing. Don't get hooked by giving out your financial information. If an e-mail looks as if it is from your bank, call your bank or log on directly to your bank's site -- not through the e-mail -- to investigate the e-mail's legitimacy.
- Be careful when applying for jobs online. Always aware of how to exploit even the most unfortunate economic situations, criminals have begun putting phony listings on some online employment sites in order to hook would-be job seekers. (See "Looking for work but finding a scam.")
- Check your credit reports. (See "How to get a credit report for free.") You are entitled to three reports (one per agency) per year. Some consumer advocates suggest ordering them at intervals so that you can keep a better eye on your credit history.
Experian (which sells such a service) also suggests hiring a credit monitor to catch additional cards that may be opened in your name.
Published June 9, 2009
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