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Fraud & Identity Theft

Does Credit Card Fraud Affect Your Credit?

Credit card fraud can impact your credit if the fraudulent activity winds up in your credit reports. Once you detect and report the fraud, however, the fraudulent transactions or accounts can be removed and will no longer impact your credit.

What Is Credit Card Fraud?

Credit card fraud can describe different situations in which someone uses your credit card or account information to make unauthorized transactions.

This can happen when someone steals or finds your card and then makes purchases with it. Your credit card account information could also be stolen as part of a data breach, or if someone used a skimming or shimming device to copy your card's information. The thief can then use the account's information to make counterfeit cards or online transactions.

How Can Credit Card Fraud Affect Your Credit?

Credit card fraud can affect your credit when fraudulent accounts or transactions get reported to the credit bureaus and added to your credit reports.

For example, if someone uses your card's information to make purchases and you don't realize it, the higher credit card balance and resulting higher utilization rate could hurt your scores.

Or, perhaps someone gets information from a credit card you almost never use. If the card issuer doesn't have your current contact information, you might not find out if the fraudster uses the card and doesn't pay the bill. As a result, you could wind up with late payments in your credit history that hurt your scores.

In a similar scenario, someone could steal your identity and use your information to open a credit card in your name. The application and new account could lead to a hard inquiry and lower the average age of your accounts, both of which can hurt your credit. You might not even realize what's happened until you check your credit report and find an account you don't recognize with a high unpaid balance.

How Do Credit Card Issuers Help?

Once you report the fraud, the credit card company may cancel the card and send you a replacement. Or, simply close the account if it was fraudulently opened. The card issuer will also investigate your allegation.

Unless the credit card company concludes that you authorized the purchases, you generally won't pay for unauthorized transactions because all four major card networks (American Express, Discover, Mastercard and Visa) offer zero-liability protection on fraudulent purchases. Your card issuer may even refund the amount while it conducts its investigation.

After the credit card issuer completes its investigation, it may also update the information it sends to the credit bureaus. As a result, high balances, late payments, accounts you didn't open and other negative information that resulted from the fraud could be taken off your credit report and will no longer affect your credit scores.

You can also file a dispute directly with the credit bureaus if you see inaccurate information in your credit reports. But you'll need to send separate disputes to each of the three bureaus that the creditor reports to.

Credit Card Issuers Also Help Prevent Fraud

Credit card issuers work to prevent fraud before it happens. They do this by monitoring accounts for unusual transactions, such as abnormal purchases or a purchase that's initiated far from where you normally live or travel. You may have even encountered these types of fraud prevention measures, when a transaction gets blocked and you need to call or text the issuer to unlock your account.

Additionally, credit card issuers may offer features and cards with extra security features:

Using these card features can help keep your card's information secure and prevent a thief from using your card.

What Can You Do to Protect Yourself?

There are also several ways you can protect yourself from credit card fraud, and get notified so you can quickly act if there's unusual activity in your account.

  • Set up email, text or app notifications for credit card transactions. You may be able to customize the notifications based on transaction amounts or whether a transaction occurred when the card wasn't present.
  • Use contactless payment when available and check card terminals for skimming devices.
  • Track all your accounts using budgeting software or Experian's Personal Finances tool, which lets you securely connect and sync financial accounts. You can then easily track account activity, which can be especially helpful for monitoring cards you don't frequently use.
  • Sign up for an identity monitoring service, such as Experian IdentityWorksSM, which can alert you if your personal information appears online, including on the dark web. It also comes with identity theft insurance, which can help pay for various expenses resulting from identity theft, including out-of-pocket costs, lost wages and legal fees.
  • Add a fraud alert to your credit reports. This lets lenders know that they should take extra steps to verify your identity before opening a new account in your name.
  • You could also add a credit lock or freeze to your credit file, which are more serious measures and typically are most useful if you've repeatedly been a victim of identity theft. If you do so, you'll also need to take an extra step to unlock or thaw your report before applying for credit.

 

Monitor Your Credit for Unexpected Changes

While you can take precautions to help prevent credit card fraud, some situations might be outside your control. Free credit monitoring from Experian comes with automatic notifications about new inquiries, accounts or updated personal information, all of which may indicate someone is trying to use (or already used) your information to open an account. You can also use your Experian account to submit disputes online, and learn what steps you can take to improve your credit in general.