High Credit Scores Tied to Higher Rate of Identity Theft

by Dawn Handschuh, Personal Finance Writer   

Consumers with high credit scores are significantly more likely to become victims of identity theft, according to a study released in June 2009 by the Experian credit bureau. 

Experian analyzed roughly 800,000 VantageScore records from 2007 to 2008 and industry-reported cases of identity theft. The results showed that while those borrowers in the bottom fifth percentile of scores — i.e., credit scores of 556 and under — experienced only four percent of identity fraud cases reported by bank card and retail card businesses, deposit account/retail banking, and telecommunications and utility companies, the incidence of identity theft rose sharply with higher credit scores. (The VantageScore ranges from 501 to 990.)

Roughly 48 percent of all identity theft occurred among those consumers in the top fifth percentile of scores, or those with a VantageScore of 815 and higher. Those with credit scores in the top tenth percentile — 881 and higher — experienced almost 30 percent of all detected identity theft.

High credit scores pave the way for easy credit, regardless of who's seeking it

It's not what you may think.

The identity theft statistics don't suggest that identity thieves seek out victims because they know these people have high credit scores. Rather, a borrower with a high credit score is more likely to gain approval for a loan application, credit card or line of credit. Therefore, an identity thief who happens to target someone with a low credit score will more likely fail to hijack that identity not because the fraud is detected, but because a low credit score often results in a rejected credit application, whether it's legitimate or not.

Higher credit scores are key to securing credit at the most competitive interest rates and with the best terms. Identity thieves who inadvertently try to open a new credit card account using the personal identity data from someone with a high credit score may be unwittingly boosting their chances for success.

Of course, the study has no bearing on identity thieves who prefer to max out existing credit accounts with personal information they have stolen, like credit card accounts.