Fraudulent accounts and inquiries on your report: sort, then act

You pull your reports for an apartment application and find a department store card you never opened, with a $2,800 balance and two late payments. Below it, two hard inquiries from lenders you’ve never heard of. Your stomach drops, and the first impulse is to dispute everything at once.

Slow down for ten minutes. Some accounts that look fraudulent aren’t, and treating a real account as identity theft creates its own problems. The ones that truly aren’t yours have a faster, stronger fix than a standard dispute, but only if you use the right one.

Rule out the look-alikes first

Credit reports list the company that furnishes the data, which is often not the brand name on your card or loan. Before you call anything fraud, run through the common mismatches.

A mixed file is a bureau error, not identity theft. You dispute it as inaccurate. Identity theft means someone used your information to apply, and that’s what the 605B block and an Identity Theft Report are built for.

If you’re still unsure, call the creditor’s fraud department and ask what’s on the application: the name, address, phone, email and date. An address you never lived at or an email you’ve never used settles it.

What a fake account does to your file

The harm comes in two stages. The first is immediate. A new card or loan adds a balance, a hard inquiry and a young account to your file. The second comes later, when the thief stops paying and the account starts reporting late payments, then a charge-off or collection.

Example: say you carry $2,000 in balances across cards with $10,000 in total limits, so your overall utilization is 20%. A thief opens a store card in your name with a $3,000 limit and runs it to the max.

Scoring models read balances relative to limits, so that change can pull your score down before a single payment is missed. FICO and VantageScore don’t publish point values, so nobody can tell you the exact drop. Once the account is blocked, it stops appearing on your report, and its balance and limit drop out of the calculation.

The late payments are the bigger long-term threat. That’s why speed matters: the sooner the account is flagged as fraud with the creditor, the fewer delinquencies get reported.

Dealing with the account itself

The FTC’s recovery plan has you call the fraud department of each business involved, explain that the account was opened through identity theft, and ask them to close it. Then ask for a letter that confirms three things:

• the account isn’t yours
• you aren’t liable for it
• it was removed from your credit reports

Expect the company to ask for a copy of your Identity Theft Report from IdentityTheft.gov, and sometimes its own fraud affidavit or dispute form. File that report before the call if you can, listing every fraudulent account and inquiry you found. The full sequence is in identity theft recovery, step by step.

Getting it off your reports

With the Identity Theft Report in hand, write to each bureau and ask it to block the fraudulent information under FCRA section 605B. The bureau must block it within 4 business days of receiving proof of your identity, the report, your identification of the items and your statement that they aren’t your transactions (15 U.S.C. 1681c-2). The bureau then notifies the furnisher. The details, including when a bureau can refuse, are in the 605B identity theft block.

Without an Identity Theft Report, you can still dispute the account as not yours. The FTC says that route takes longer and isn’t guaranteed to work.

Only block or dispute accounts that truly aren’t yours. If you opened the account and fell behind, calling it identity theft is a misrepresentation, and the statute lets the bureau put the information back.

Inquiries you didn’t authorize

A hard inquiry from a lender you never applied to is often the first trace of an attempted account. Sometimes the application was denied and no account appears. The inquiry is still evidence.

Call the company that made the inquiry and ask whether an application was submitted in your name and what happened to it. If an account was opened, deal with it as above. Either way, list the inquiry in your Identity Theft Report and in your block request. For inquiries that came from a real but unauthorized pull, not identity theft, see removing inquiries you didn’t authorize.

When a collector calls about it

Fraudulent accounts that go unpaid end up with collectors, sometimes before you’ve even found them on your report. The FTC advises writing to the collector within 30 days of getting its collection letter, saying the debt isn’t yours, and enclosing your Identity Theft Report. Ask the original business to stop reporting the debt and to send you the account records, including the application.

Keep copies of everything. Fraudulent debts get sold, and a new collector may surface months later with the same account. Your file of letters and the “not liable” confirmation is what makes that second round short.

Your order of operations

1. Rule out a store-card bank, debt buyer, servicer change, authorized-user account or mixed file using the table above.
2. Call the fraud department of each business with a fraudulent account or inquiry, and ask them to close it and send a “not liable” letter.
3. File an Identity Theft Report at IdentityTheft.gov listing every fraudulent item.
4. Send each bureau a 605B block request with the four required pieces.
5. Freeze your credit at every bureau so the next application fails at the door.
6. Pull your reports again after the block deadline and confirm each item is gone. Free weekly reports are at AnnualCreditReport.com.