Are People with Low Credit Scores at Risk of Identity Theft?

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Identity theft occurs when someone procures your personal information such as your name, address, Social Security number, and date of birth. The thieves then use this information to commit various crimes against you and others. One such crime is, for example, credit-related fraud. And while identity theft continues to rank at or near the top of the fastest growing financial crimes, does having poor credit scores make you more at risk of falling prey to identity thieves?

Credit challenges, like low credit scores, could cause you to have a more difficult time qualifying for credit cards, loans, and other extensions of credit. Recognizing the rhetorical nature of the question, if you have a hard time getting credit then wouldn’t a thief also have a hard time? As in, are you still at risk for identity theft when you have low credit scores?

It’s an interesting question to be sure. And, the answer might surprise you. Even if you have bad credit, you can still be the victim of identity theft, just with a different group of creditors. Therefore, it’s important to monitor your credit reports for fraud no matter the current condition of your credit reports or credit scores.

Potential Identity Theft Challenges with Low Credit Scores

When you have good credit, a criminal may be able to do more damage with your stolen personal information than he or she could do if you have bad credit. Yet, even with low credit scores, an identity thief might still be able to open fraudulent subprime credit accounts in your name.

Imagine the following scenario; a fraudster pretends to be you and applies for a subprime credit card using your Social Security number and other personal details. If a lender approves the fictitious credit application for the subprime card, that account has the potential to further damage your credit history and credit scores. In that scenario the quality of your credit scores was irrelevant.

Now let’s flip the scenario. Let’s say the fraudster applies for credit with American Express, a lender that does not have subprime credit products. The application is going to be denied because of, at the very least, poor credit scores. Now the fraudster moves on to another creditor.

Even if several lenders deny the fraudulent loan applications, you might experience other credit problems from the stolen identity. Remember, each credit application may trigger a “hard” credit inquiry on one or more of your credit reports. An excessive number of hard inquiries could result in a decline in your credit scores. The good news is once you report the fraud to the credit bureaus and identify all of the fraudulent inquiries they will remove them.

How to Avoid Identity Theft

Unfortunately, it’s not always possible to keep your sensitive information out of the hands of people with bad intentions. Sometimes the data is out of your control.

Take the Equifax data breach of 2017, for example. That unfortunate event exposed the information of 147 million Americans when an Atlanta based credit bureau experienced a data breach. You can name dozens of companies that had similar experiences with hackers. And, we have all been the victim of fraudulent use of our credit cards. Point being, it’s hard (impossible) to avoid being a target or possible victim.

On a positive note, you can take steps to limit what thieves can do with your information if they do get their hands on it. Here are some options to consider.

  • Freeze Your Credit Reports: You can place a security freeze on your credit reports with Equifax, TransUnion, and Experian. (Tip: You have to contact each credit bureau separately to initiate a credit freeze) A freeze takes your credit report out of circulation and prevents lenders with whom you have no relationship from accessing your credit information unless you first “thaw” your report. There is no cost to place or lift a freeze.

  • Fraud Alerts. Another protective measure is the fraud alert. Fraud alerts are also free, but they don’t stop lenders from accessing your credit reports. Instead, they alert lenders that you may have been the victim of fraudulent applications and they place a duty upon lenders to verify the authenticity of any credit applications submitted in your name.

Bottom Line

An identity thief may be able to do more damage if they steal the personal information of someone who has good credit scores. But, that doesn’t mean you should ignore the need to keep your credit information safe just because you have less-than-perfect credit.

Get in the habit of checking your three credit reports on a regular basis for signs of fraud and other potential problems (like credit reporting errors). Consider placing security freezes and fraud alerts on all of your credit reports as well. They’re free and are very effective at keeping your credit reports safe.

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