Month: January 2016

Identity Theft’s Impact On Your Credit Score


Identity theft is a crime that has a substantial impact on the victim. If you experience identity theft, the consequences can have rippling effects that may follow you for the rest of your life.

According to the Insurance Information Institute, identity theft is unfortunately a fairly common type of crime. The state of Florida reported the highest number of complaints at 38,982 in 2014. The top five states for cybercrime in 2014 that led to identity theft included:

  • California
  • Florida
  • Texas
  • New York
  • Pennsylvania

Awareness of the crime and knowing how to react will help you protect yourself against the repercussions of identity theft.

Identity theft scars your credit score

According to Experian, your credit history dictates your ability to qualify for loans. Essentially, it works as a report card for your financial responsibility, and lenders look at it to decide whether you are a risky borrower.

If you have a high score, not only will you qualify for mortgages, lines of credit and other loans, but you will also likely have a low interest rate, which will save you a great deal of money over the life of the loan. When a credit score is low, a consumer may face rejection and impossibly high interest rates that can burden personal finances.

Excellent credit usually sits at or above 720, while a score below 620 is a red flag for lenders. About 35 percent of a credit score is based on whether you pay your bills on time. Another 35 percent is determined by the balance-to-limit ratio on your credit card bills or loans. Only 15 percent of the score accounts for the age of the credit history, and mixed credit make up 10 percent of the final score. Another 10 percent accounts for the number of inquiries from creditors. So each time you attempt to open a new line of credit, your credit score is impacted.

When you fall victim to identity theft, your credit score also falls. Typically, a criminal will open accounts, apply for new loans or lines of credit under the name of their victims, and then not pay the bills. When this happens, credit scores plummet. Credit inquiries also impact your score and bring it down by a few points each time a lender checks your credit report.

In addition, Good Financial Cents noted criminals might open a wireless plan or pay for a home utility bill with your personal information but without paying the bills. Unfortunately, this will lead to negative items appearing on your credit report.

Your information may wind up being turned over to collections due to the unpaid debt accrued by a criminal who stole your identity. 

React to identity theft

When you realize you are a victim to this crime, the key is to react swiftly to minimize the damage. Ensure that you notify police of this crime and file a report right away. This is a serious crime and when disputing various negative items on your credit report, a police report will be critical in building a case to present to creditors and the credit bureaus.

Keep an eye on your credit score regularly. If you notice a significant drop, it may be due to identity theft. The Consumer Finance Protection Bureau also noted you should contact the credit bureau as soon as you notice inaccurate information present on your report. You will also want to contact and cancel all credit accounts that have been compromised by thieves.

Whatever you do following identity theft, make sure you document each step you’ve taken to present to the creditors and credit bureaus and continue down a more prosperous financial future.

Prevent identity theft

One of the best ways to eliminate your risk of identity theft harming your credit score is to become aware of this type of crime. Knowing the serious side effects of identity theft and how it can impact your life will encourage you to prevent it.

Lexington Law Firm provided some simple tips for preventing identity theft, such as not carrying around a Social Security card or passport, and not revealing a PIN or other personal information. Even your birthday can be used against you.

Whenever you receive mail, always shred the documents so your information cannot be compromised. Criminals can easily gather mail and use the information to open new lines of credit that may damage your credit score. If you do not already own a paper shredder, consider investing in one.

Monitoring your credit score regularly is another way to protect yourself against this crime. If you notice any suspicious activity, react quickly. The faster you do this, the less identity theft can impact your financial situation and credit score.

Related Articles:

About Lexington Law Firm’s Identity Theft Focus Track

Identity Theft and the Holidays

5 Steps to Protect Yourself from Identity Theft during College

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5 Tips for Eliminating Credit Card Debt

Credit card debt can bring your credit score down and keep you from qualifying for loans or additional lines of credit. If debt is keeping your score low, start paying off your credit card bills and follow these five simple tips to help eliminate debt quickly and responsibly: 

  1. Get organized

When faced with credit card debt, you must have an action plan. U.S. News & World Report suggested organizing the debt you have accrued to determine which bill to pay off first.

“The best move from a purely financial perspective is to attack the highest-interest rate cards first,” said Scott Halliwell, a certified financial planner at USAA, according to U.S. News & World Report. “Roll all the money you were applying to [the highest-interest card] each month to the debt with the next-highest interest rate. And so goes the process until all the debt is eliminated.”

Bank of America noted that focusing on paying one balance at a time, while also paying the minimums on other lines of credit, could quicken the process.

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What Affects Your Credit? Identity Theft.

The attorneys at Lexington Law Firm are experienced and can help you move forward with your credit situation. One of those credit situations may be identity theft — which can negatively affect your credit when someone uses stolen personal identifying information to apply for lines of credit. Contact Lexington Law Firm today to find out how we can help you with your credit situation.

Related Articles:

Protecting Yourself Against Identity Theft

Child Identity Theft: How Can Parents Protect Their Kids’ Identity

Gone Phishing: What to Do After Attempted Identity Theft

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Understanding Your Cumulative Credit Score


It’s said that you should give credit where credit is due, but when it comes to your credit report, simply paying your bills on time isn’t the only thing that matters.

There are at least five components that result in a cumulative score, none of which are equally weighted. Changes in any of the five areas can have an impact on how lenders view you.

Understanding the percentage rule — the valuations that form your credit score — can help you make smart financial decisions, and guide you in the right direction if you are doing some credit repair.

How payments influence your credit

The categorical differences between what contributes to your credit score and what doesn’t can be quite confusing if never explained. Most consumers acknowledge that making on-time payments is important, but even that rule of thumb has a caveat.

While a good track record is important, every payment you’ve ever made on your own does not contribute to the 35 percent that payment history weighs on your credit score. According to, public records, both open and closed lines of credit, delinquencies and overall good repayment practices all account for portions of your payment history. Credit cards from banks and retailers may be expected, but there is often confusion around what is considered a public record. Utility bills, most loans (depending on the lender) and formal payment agreements are not reflected on your credit report or score unless they go to collections.

Failure or inability to meet the terms of your financial agreement will show up as a negative mark on your credit report. In some cases, however, you can settle outstanding balances before they affect your score — even if they have already gone into collections. Liens, as well as foreclosures, bankruptcies, lawsuits and court rulings may also be negative markings on your credit report with information of the amount and the lateness of each payment included.

If you are concerned about a few late payments, fret not. The payment percentage of your credit score is less than half, and a few instances of delinquency will shave only a few points off your score, if they occur infrequently.

The next-most influential criterion of your credit score is your debt-to-income ratio. The amount you owe on any given accounts, as well as the nature of the obligation, are all worth 30 percent of your score. Student loans, for instance, are reviewed differently than your favorite department store credit card. The number of accounts you have open, the amount owed on each and their utilization ratios are all taken into account to determine this portion of a credit score.

Credit length and history

Credit history accounts for about 15 percent of your overall score. Equifax, one of the three largest credit bureaus, said while having long credit history is more favorable, opening too many new accounts over a short period of time can have negative implications. Your newest account, oldest accounts and the average age of any open credit lines are all shown here.

Accounts in use, much like the “amount owed” percentage, features the types of credit you have. Whether it’s revolving or installment-based, how many accounts you have of each type and even closed accounts show up in the accounts-in-use category, totaling 10 percent.

You may not even have to open an actual account to affect this last category. If a creditor, or anyone for that matter, makes a hard inquiry into your credit standing, it affects the final 10 percent of your score. Though exceptions are made – like in the event you are shopping for car financing – even apartment and cell phone inquiries have the potential to show up here. It matters not if you are approved or denied. Credit inquires are echoed here. Period. Too many inquiries at any given time can hurt your score, said Equifax.


Related Articles:

Top 5 Reasons You Should Improve Your Credit Score

Five Factors of Your Credit Score

Top 5 Credit Score Myths

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New Year, New House: Should You Sell?


The real estate market has seen a steady improvement since the housing crash of 2008. As home values increase, many owners are weighing the benefits of selling. Real estate can have a polarizing effect on your credit: a wise investment can lead to greater profits, more options and financial strength. On the other hand, a poor choice can yield the opposite results. Consider the following points as you move forward in the selling process — they will help you make the right decision.

Before selling your home, don’t forget to:

  1. Create a plan of investment. Selling for selling’s sake may be exciting, but it isn’t the best financial decision. Consider the following example:

Mark and Stella Carson are planning to move across town. They bought their home five years ago for $250,000. A recent uptick in the market means the Carsons can list their home for $289,000. Despite the promise of a profit, the Carsons don’t consider a few key factors:

  • Closing costs. Once you’ve paid off your old mortgage, you’ll still need to pay your agent’s selling commission, usually between 5 and 8 percent of the home’s purchase price. In the Carsons’ case, they pay 6 percent, or $17,340.
  • Moving expenses. Hiring movers sets the Carsons back $1,200. They own several pieces of furniture that are too heavy to carry themselves.
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