A credit card theft can harm your credit profile in many ways apart from causing a financial loss itself.
If you are lucky, the person who finds your misplaced card will try to locate you and return it without doing any harm. However, a lot of times credit cards end up in the hands of individuals that have a broken moral compass. So, they can use your card in a way that it affects your credit score.
The following are some of the most common ways a credit card theft can affect your credit score:
When a card is stolen and you report the same to the issuing bank, then they may close the account itself so as to prevent any misuse. After this, they can issue a new card to you.
The problem in this situation is that if the account is quite old, then closing it can lead to a low CIBIL score. This is because old accounts make the biggest contribution to a credit score.
The good news is that the majority of card issuers are aware of the impact of abruptly closing a credit card account. So, instead, they transfer the financial and personal details of the current card to a new card, which is thus essentially the same in nature and doesn’t impact the score.
A lot of times, the victim doesn't realize that their credit card is stolen for a long time. So, all this time the culprit can keep on making purchases online or spend the credit through other means, which can lead to a high debt.
By the time the victims gets to know about the theft, the damage is already done. Even though they can get their account closed to prevent further unauthorized transactions, they still have to deal with a low CIBIL score.
Failing to transfer your automatic monthly payments such as utility bills, gym membership, subscription charges, etc. from the old card to the new one can also damage your credit profile. This is because when the concerned companies will try to charge against your old card, these will be declined by the card issuer. This can raise all kinds of problems.
In most cases, the person who has stolen your credit card will max it, or use it excessively. This can lead to high credit utilization which is detrimental to your CIBIL score.
A large number of banks have set up certain measures to minimize fraudulent credit cards related activities. For instance, they usually monitor the credit card activities and contact the owner if there are any suspicious charges on the account of previous purchase history, etc.
If you are lucky, your bank will contact if you if they feel your card has been stolen due to suspicious new purchases. Otherwise, if you learn about the same yourself, then contact your bank and ask them to close your account immediately.
Remember- timing is the key here. The longer it takes for you to close your account the more time will the culprit will get to make unauthorized purchases with the same and increase the debt.
Even if your card is charged against unauthorized transactions, it's possible to reverse the same. However, it depends on your card issuer and the nature of the transactions as well.
You may or may not be able to get all the transactions reversed. However, it's still the best way to go.
You can correctly assess the damage occurring because of your lost card by checking your CIBIL report time and again. There are all kinds of things that you may miss if you ignore this step.
If you find that your score has dropped, then go through your report and see how it can be fixed. Be sure to take the appropriate action immediately as delay can make the situation worse.