Does Reporting a Credit Card Stolen Lower Your Credit Score?

Thieves can purchase credit card numbers on the Internet for as little as 40 cents, according to a 2008 report on the Slate website. Perhaps more important, the theft can ruin the cardholders credit score. Reporting a credit card stolen can lower you score, depending on what course of action you take. As long as you keep the account open, your score should stay the same. Not reporting a stolen credit card and allowing unauthorized users run up a large amount of debt has many negative ramifications.

Identification

Calling up a credit card company to report a stolen card won't hurt a credit score. However, you can damage your score by closing your account permanently, because you lose available credit and, therefore, raise your credit utilization ratio. The credit utilization ratio is the amount of your outstanding debt relative to your total credit limit, and it makes up a significant portion of your score. Keeping the account, but getting a new number won't hurt your score, because card issuers usually just transfer the history from the stolen card to the new account, according to the Bankrate website.

Considerations

Upgrading an account after reporting a card stolen could lower a credit score when the customer requests the upgrade, because the issuer might run a hard credit inquiry. Hard inquiries hurt credit scores by about five points, because they indicate a need for new credit. If the credit card company offers an upgrade with the account transfers, the customer's score won't be affected by a hard inquiry.

Tip

A hard inquiry has little effect on whether you can get credit. If the upgrade to your credit card account includes a significant increase in your credit limit, that will lower your credit utilization ratio, which may offset the loss of credit score points and may raise your score. To help determine whether a stolen card may affect your score, you can check your credit report online. You can receive one free report from each of the three major bureaus (Experian, Equifax, TranUnion) each year -- or a total of three reports every 12 months.

Prevention

A way to stop a stolen card from lowering a score is to prevent the theft. Only shop at secure websites, which begin with "https." One phishing scam involves emails purporting to come from a credit card issuer claiming you must re-enter card and financial details at a fake website to keep the card active. If a website allows you to store your card number for future use, you should decline this option.