What Options Do I Have If My Credit Score Drops Due to Unauthorized Charges?

A drop in your credit score due to unauthorized charges can be frustrating and distressing, especially if you suspect fraud or identity theft. However, there are several actions you can take to address the issue and potentially recover your credit score. By acting quickly and following the proper procedures, you can dispute the unauthorized charges, protect yourself from further harm, and start the process of repairing your credit.

Steps to Take if Unauthorized Charges Impact Your Credit Score:

1. Identify the Unauthorized Charges:

• Review Your Credit Report: The first step is to identify the unauthorized charges by reviewing your credit report. Look for any unfamiliar accounts, transactions, or inquiries that you didn’t authorize. You can get a free credit report once a year from the major credit bureaus—Equifax, Experian, and TransUnion—through the official site AnnualCreditReport.com.
• Check Your Credit Card and Bank Statements: In addition to reviewing your credit report, thoroughly check your credit card and bank statements for any suspicious activity. Sometimes fraudulent charges may show up on your statement before they are reported to credit bureaus.

2. Report the Unauthorized Charges to the Credit Card Issuer or Lender:

• Contact Your Credit Card Company or Lender Immediately: As soon as you identify the unauthorized charges, contact the credit card issuer or lender that reported the charge. Most credit card companies have a fraud department specifically for handling such cases.
• File a Dispute: Explain the situation and file a dispute with the creditor, explaining that the charges are not yours. Be prepared to provide any supporting documentation, such as a police report (if applicable) or evidence that you did not authorize the charges.
• Request a Chargeback: If the charges were made using your credit card, ask the issuer to initiate a chargeback. A chargeback is a reversal of the transaction, which may help you get the money back.
• Freeze or Close Your Account: To prevent further unauthorized charges, request that your account be frozen or closed, and ask for a new account number and card. Ensure that all fraudulent charges are removed from your account.

3. File a Fraud Report with the Authorities:

• Report to the Federal Trade Commission (FTC): In the United States, report the unauthorized charges to the Federal Trade Commission (FTC) via their IdentityTheft.gov website. They can guide you through the process of filing a report and taking steps to protect your identity.
• File a Police Report: If you believe the unauthorized charges are the result of identity theft or fraud, you should file a police report. This can help establish a record of the fraud and may be necessary for disputing the charges with creditors or credit bureaus.
• Create an Identity Theft Report: If your personal information has been stolen, creating an identity theft report with the FTC (in the U.S.) or equivalent authorities in your country will help protect you from further financial damage.

4. Dispute the Charges with the Credit Bureaus:

• File a Credit Report Dispute: You have the right to dispute inaccurate or fraudulent information on your credit report. Contact each of the three major credit bureaus—Equifax, Experian, and TransUnion—and file a dispute for the unauthorized charges.
• Provide Documentation: Provide supporting evidence of the fraudulent charges, such as your police report, fraud report, and any communication with the credit card issuer or bank.
• Monitor Your Dispute: The credit bureaus are required to investigate disputes within 30 days. Keep track of the dispute process, and ensure that the unauthorized charges are removed from your credit report.
• Request a Fraud Alert: You can place a fraud alert on your credit file, which notifies creditors that you may be a victim of identity theft. This helps prevent additional accounts from being opened in your name without your permission.

5. Protect Your Credit:

• Consider a Credit Freeze: If you are concerned about further unauthorized charges or identity theft, consider placing a credit freeze on your credit file. This prevents creditors from accessing your credit report and can stop new accounts from being opened in your name.
• Monitor Your Credit Regularly: After resolving the issue, sign up for a credit monitoring service to track your credit score and receive alerts about any changes to your credit file. This can help you spot any future signs of fraud or unauthorized activity.

6. Work with a Credit Repair Agency (If Necessary):

• Seek Professional Help: If your credit score has taken a significant hit due to unauthorized charges, you might consider working with a credit repair agency to help dispute negative marks on your credit report and improve your score. Be cautious when selecting a credit repair agency—make sure they are reputable and transparent with their fees and services.
• Follow Up on Disputes: If the unauthorized charges are not removed promptly, or if the credit bureaus do not take appropriate action, a credit repair service can assist in filing follow-up disputes or legal claims to rectify the situation.

7. Check for Identity Theft and Take Preventive Action:

• Identity Theft Protection: Consider enrolling in an identity theft protection service that monitors your personal information across various databases and alerts you to any signs of misuse. Many services offer credit monitoring, fraud detection, and recovery assistance.
• Change Your Passwords and Security Settings: If the unauthorized charges were made after your personal information was compromised (for example, through a data breach), update your passwords and security questions for your online banking, email, and shopping accounts. Enable two-factor authentication (2FA) wherever possible for added security.

Example:

Suppose you notice a sudden drop in your credit score after seeing unauthorized charges on your credit card account. Upon reviewing your statement, you identify several purchases you didn’t make. You immediately contact your credit card issuer to report the fraudulent activity, file a dispute, and request a chargeback. You also file a police report and an identity theft report with the FTC, and place a fraud alert on your credit file. After working with the credit bureaus and the creditor, the unauthorized charges are removed from your credit report, and your credit score gradually improves as the negative marks are resolved.

Conclusion:

A drop in your credit score due to unauthorized charges can be distressing, but it is possible to recover your credit standing with prompt action. Start by identifying the unauthorized charges, reporting them to the credit card issuer, and filing a dispute with the credit bureaus. Taking steps such as placing fraud alerts, freezing your credit, and monitoring your credit regularly will help protect you from further harm. If necessary, seek professional help from a credit repair agency or legal assistance to ensure the issue is resolved. By staying proactive and informed, you can restore your credit score and protect yourself from future unauthorized activity.