Consumer Car Buying Advice Blog

A new Experian study finds a significant relationship between credit scores and the victims of identity theft.

An obvious relationship

At Auto Credit Express, we’ve always thought that the relationship between a person’s credit score and the chance that they would be the victim of credit fraud is fairly obvious. Not to put too fine a point on it, but if you were an identity thief and you had the choice of stealing the information of someone with a 560 FICO score or someone with a 760 credit score, which person would you choose?

Good versus bad credit files

The information contained in the 760 score would enable you to open new lines of credit, max out current credit cards (maybe even an American Express Platinum with no limit) and possibly even finance anything from a flat screen television to a new car.

The 560 score, on the other hand, would pose a number of problems. You would have limited credit lines, the inability to open new accounts and, even if you could get financed on a new car, the lender would probably require proof of income, including a current pay stub, as well as proof of residency – things that are not as easily obtained as the credit information, itself.

So how do credit fraudsters know the difference? As it turns out, they probably don’t and the above scenarios have a lot to do with the higher score/higher fraud percentage ratios.

Experian “snapshot”

According to Experian, a recently released report (what the company calls a “Market Insight Snapshot”) has analyzed the rate of identity fraud across various credit score ranges and it shows a clear correlation between high credit scores (for individuals) and “the propensity for identity fraud victimization.”

“Experian’s findings should herald a warning for consumers and businesses alike,” said Hiq Lee, senior vice president and general manager of Experian’s Fraud and Identity Solutions group. “Identity fraud can damage an individual’s finances as well as a company’s bottom line and reputation with consumers. Experian is uniquely positioned to not only alert consumers and credit issuers to findings such as these, but also to offer products and services to help them combat the problem.”

Playing the percentages

Although the credit scoring in the study is based on Experian’s VantageScore instead of the more familiar FICO score, it’s still not difficult to understand. Using the VantageScore of 769 as a reference point for the average U.S. score, the study finds that those consumers in the lowest 20% (501-556 VantageScore) of the credit scoring population experienced a mere 4 percent of chance of detected identity fraud. Those consumers at the opposite end of the spectrum – the highest 20% (815-990 VantageScore) – experienced 48% of all identity fraud detection.

Conclusions

There is also a certain logic to these findings. Although those consumers with higher scores may be targeted more than consumers with lower scores, how are identity thieves able to differentiate between the two? It turns out that they very well may not be able to tell the difference.

According to the report, “although there may be fraud attempted against those with lower credit scores, it is less likely that those attempts will come to fruition. In essence, those with lower credit scores may be relatively safe from identity fraud simply because their scores are likely to be a barrier to entry in opening a credit-based account such as a credit card or a loan.”

An ounce of prevention

Experian also has a number of suggestions to help consumers prevent identity fraud:

• Consumers at all credit levels – but particularly those at the top – need to actively protect themselves from becoming victims of identity fraud.

• Consumers need to be aware that they are the first line of defense in preventing their information from being pirated in the first place.

• Consumers should not give out personal information over the phone unless they have initiated the call.

• Consumers should take precautions such as shredding financial documents and other documents containing sensitive information.

• Consumers should regularly check their credit reports at the three reporting companies. This could include enrolling in a credit monitoring program (such as freecreditreports360.com or from one of the three companies) that will detect the crime quickly so that immediate action can be taken to mitigate the damage.

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