Good credit easier to steal, because you're more likely to be approved
By Jeremy M. Simon
Having a high credit score makes it easier -- and cheaper -- for you to borrow money. But a new report from credit bureau Experian reveals that a high score also makes it easier for identity thieves to secure stolen credit in your name.
| The higher your credit score, the higher the risk of ID theft |
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| The graph shows rates of ID theft in relation to the victim's VantageScore credit score. 
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"What we can say is consumers with high credit scores tend to get approved for accounts on a more regular basis," says Heather Grover, senior director of product management with Experian's Fraud and Identity Solutions group in Costa Mesa, Calif. Apparently, when fraudsters use the identifying information from these consumers, they, too, are more likely to get approved for credit.
Higher score helps ID thieves
In its first-ever study looking at credit scoring and fraud, Experian's market insight snapshot uncovered a "significant connection" between high credit scores and becoming a victim of identity thieves. Based on the credit bureau's analysis, "the occurrence rate of identity fraud rises dramatically as credit scores increase." Experian says it has no data to suggest that ID thieves specifically target those with higher credit scores.
For its study, Experian analyzed more than 800,000 records from 2007 and 2008, including data provided by bank card issuers, retail card issuers, retail banks, mobile phone providers and utility companies. Both businesses and borrowers identified instances of fraud. These instances included examples of fraud "tagged" by businesses, as well as self-reported cases -- when the consumer told the business, "I don't have an account with you. I've never applied for a credit card," says Grover.
Experian considered its own VantageScore, rather than the more popular FICO score, when crafting the report. VantageScore was launched in March 2006 and is a joint venture between the three major credit bureaus -- Equifax, Experian and TransUnion. For its study, Experian defined identity theft as "any event in which a third party used the identity of another consumer" to gain access to money or services.
Fraud breakdown by VantageScore
The bulk of ID theft impacted the best borrowers. VantageScores range from 501 to 990, with a higher score indicating lower risk to lenders. Experian says the average VantageScore for U.S. borrowers is 769. Just under half of all identity fraud occurred among the segment of borrowers with a VantageScore of 815 or higher. Additionally, the top 10 percent of borrowers (VantageScores of 881 and above) accounted for almost 30 percent of detected identity theft.
That's because cheaters are most likely to pass when they target the smartest kids in class. "That range -- the 881 and above -- would be 'B+' and 'A' credit risk," Grover says.
Meanwhile, consumers with poor credit tended to be victimized less frequently by fraudsters. Borrowers in the bottom 20 percent of the sample group (VantageScore of 556 and below) only suffered 4 percent of detected identity theft.
Higher score means easier credit for fraudsters
Just as a high score enables a borrower to more easily qualify for credit, an identity thief who uses a high-score borrower's personal information to fraudulently apply for credit is also more likely to qualify. According to Experian, "just as in cases of legitimate activity, an application for credit is more likely to be approved when the applicant has a high credit score rather than a low credit score."
| Just as in cases of legitimate activity, an application for credit is more likely to be approved when the applicant has a high credit score rather than a low credit score. |
| -- Experian |
On the flip side, identity thieves who apply for credit using the information of those with lower credit scores are more likely to get rejected. "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," Experian says.
Preventing ID theft
Experian says that both consumers and businesses need to take steps to prevent fraud. "Having both in place is the best solution," Grover says. While businesses need to establish systems to make sure consumers are who they say they are, Experian recommends that borrowers:
- Be careful about who they provide personal information, including not providing personal information over the phone unless they have initiated the call.
- Shred documents that contain both financial and other sensitive information.
- Regularly check credit reports with the three major U.S. credit bureaus.
- Enroll in credit monitoring to be notified of any charges to their credit report.
