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Does Reporting Fraud Affect Credit Score

4 min read

 Niki Giovanis

Written By

Niki Giovanis

Does Fraud Affect Credit Score

Credit cards have become ubiquitous in our daily lives, providing easy access to credit and rewards programs. However, losing a credit card or falling victim to credit card fraud can be a stressful and confusing experience. In addition to the potential financial loss, many individuals may wonder how a lost or stolen credit card can affect their credit score.

In this article, we’ll explore the impact of a lost or stolen credit card on your credit score. We’ll discuss how a decreased available credit can increase your credit utilization ratio and affect your credit score. We’ll advise individuals to report the loss or theft of a credit card immediately to avoid scams and identity theft and request a replacement card. Finally, we’ll highlight the importance of responsible credit card usage to maintain a healthy credit score.

What happens when you lose a credit card?

Losing a credit card can be a stressful experience, but it doesn’t hurt your credit score directly. However, a decrease in available credit can increase your credit utilization ratio, which is a factor that affects your credit score.

For example, if you have a credit card with a $10,000 credit limit and a $5,000 balance, your credit utilization ratio is 50%. If you lose that credit card and your credit limit drops to $5,000, your credit utilization ratio increases to 100%. This can harm your credit score.

What happens when your credit card is stolen?

If your credit card is stolen, the impact on your credit score is similar to losing a credit card. However, there is an additional risk of fraudulent charges being made on your credit card account.

To protect yourself from fraudulent charges, it’s important to report the theft of your credit card immediately to your credit card issuer. You should also check your credit card statements regularly to ensure that no unauthorized charges have been made.

What is a fraud alert?

A fraud alert is a security feature that can be placed on your credit report if you suspect that your identity has been stolen or that you are at risk of identity theft. Once a fraud alert is placed on your credit report, lenders and creditors are required to take additional steps to verify your identity before issuing credit in your name.

What is an active duty fraud alert?

If you are on active military duty in Canada and believe you are a victim of an identity thief, you can place an active duty fraud alert on your credit report. An active duty alert works similarly to other identity theft notifications by alerting credit card companies that you are concerned about unauthorized activity on your credit cards and other accounts while away on duty.

To place an active duty fraud alert on your account, you'll need to:

1. Contact Equifax directly or send in your request by mail

The first thing you'll need to do is make an Equifax account if you do not already have one. Once logged in, you can download the active duty alert form, fill it out, and send it to Equifax by mail.

2. Consider an extended fraud alert on your credit report

Note that should active service members wish to undergo a credit freeze through an extended fraud alert, you will need to file a police report. This extended fraud alert lasts for seven years and will remove any insurance or credit card offers for the last five years.

Common finance scams

From insurance to credit cards, there are numerous types of financial scams Canadians can fall victim to. Here are some common finance scams to avoid:

Fake cheques

Oftentimes, you'll get a call from someone claiming you've won money, and a cheque is in the mail for you. When you go to cash the chequ,e it will be approved, but you'll be asked by the scammer to send money for fees and taxes to them. At a later date, the cheque will bounce and you'll have paid the scammer a certain amount of money that has now been lost.

Debt collections scams

Debt collection scams specifically target those with high debt amounts. You'll likely receive a call from a "collections company" stating that you owe them money to pay off your debts. Unsuspecting victims will then be pressured into giving the scammer their credit card information.

Home repair scams

A contractor may knock on your door stating that your home needs repairs. They'll say they can take care of the job for cheap if you pay in cash today, with the work to follow the next day. You'll then give money to the scammer only for them to never return.

E-transfer scams

E-transfer scams can either be sent through SMS text or email. The text will usually say you have money waiting to be deposited into your chequing account. Once you click the link and enter your information, your bank accounts have now become vulnerable to scammers.

What does a restricted credit card mean?

A restricted credit card means that your ability to use your card has temporarily or permanently been taken away. Because of this, you will not be able to use your card to make a purchase or withdraw cash. This could be due to missed payments, a fraud alert, suspicious transactions, and more.

To resolve this issue, you'll need to speak to your credit card company directly and/or resolve the initial fraud alert that notified your company of possible identity theft.

Is it safe to use a debit card online?

If you're worried about being the victim of identity theft, you may be wondering whether it's safe to use a debit card online. Generally speaking, yes, it is safe to use a debit card online, given that there are numerous precautions in place to keep your finances secured. This includes instant account monitoring, secure online transactions, PINs to verify your identity, and measures to protect you from fraud.

How does a fraud alert impact my score?

A fraud alert does not directly impact your credit score. However, it can impact your ability to obtain credit or loans. Lenders and creditors may view a fraud alert as a red flag, indicating that you may be at a higher risk of identity theft.

How can I remove a fraud alert?

If you no longer need a fraud alert on your credit report, you can request that it be removed by contacting the credit reporting agency. You may need to provide proof of your identity before the fraud alert can be removed.

Losing a credit card or falling victim to credit card fraud can be a stressful experience, but it doesn’t have to negatively impact your credit score. By reporting the loss or theft of your credit card immediately, checking your credit card statements regularly, and monitoring your credit report for unauthorized activity, you can protect your bank account from the financial and credit score impact of credit card fraud.

What does a bad credit score mean?

The origin of credit scores dates back to the early 1800s. However, modern-day credit scores have only existed for the last 50 years. Today, having a credit score is like a financial report card. So, what does a bad credit score mean? While the average credit score in Canada is 680, credit scores range between 300 and 900. The lower your credit score, the more of a risk to creditors and other potential lenders you are, which can make it more difficult to borrow money, secure low interest rates, and achieve your financial goals.

Unsure what your credit score is? Get a free credit score check and build your credit with KOHO by applying for a virtual credit card with overdraft protection coverage! You can even get a cash advance of up to $250 interest-free in the process!

How can you fix bad credit?

If you've got a lower credit score, know that you aren't alone and that there are ways to fix it. To fix bad credit, responsible credit card usage, such as paying bills on time and keeping credit utilization low, is key to maintaining good financial health. Ultimately, your on-time payments will be sent to a credit bureau like Equifax or Experian, which will then be recorded on your credit report. And, over time, you can build your credit.

The Bottom Line

Identity theft and other types of scams are on the rise in Canada. To ensure you don't become a victim, it's essential that you remain vigilant about your plans for spending and saving. With prepaid cards and high-interest savings accounts, KOHO offers numerous financial products to Canadians who are searching for safe and secure ways to streamline and protect their finances. Reach out to KOHO today for more information.

Note: KOHO product information and/or features may have been updated since this blog post was published. Please refer to our KOHO Plans page for our most up-to-date account information!

Note: KOHO product information and/or features may have been updated since this blog post was published. Please refer to our KOHO Plans page for our most up to date account information!

About the author

Niki is a communications specialist with years of experience as a freelance and marketing agency content writer. With a knack for storytelling, Niki enjoys working with businesses from diverse industries to craft engaging content that resonates with target audiences worldwide.

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