How Do Fraud Alerts Affect Credit?

What Is a Fraud Alert?

A fraud alert is a notification you have the right to add to your credit reports if you believe or know you have been a victim of identity theft or credit fraud. When an alert is attached to your credit report, any lender who reviews your credit in connection with an application for a loan or credit is required to take extra steps to verify your identity before processing the application. This is designed to prevent thieves from using your credentials to borrow money or make credit card purchases in your name.

When you place a fraud alert on your Experian credit report, Experian automatically notifies the other two national credit bureaus (TransUnion and Equifax) to add alerts to the credit reports they keep on you.

There are three types of fraud alerts, and you have the right to request any of them at the Experian Fraud Alert page. When requesting any of these alerts, you must provide a copy of a government-issued ID, plus a piece of mail, such as a utility bill or bank statement as proof of address. Supporting documents can be submitted by U.S. mail or scanned and uploaded as electronic files.

• Temporary fraud alert: This is sometimes called an initial fraud alert. If you suspect your personal information has been used fraudulently, or even just worry that it may be subject to abuse because of suspicious account activity or a data breach, you can add a temporary fraud alert to your credit report. Unless you decide to remove it sooner, a temporary fraud alert will stay on your credit reports for one year and then expire. You can renew it as many times as you like.
• Active-duty fraud alert: U.S. service members can use an active-duty fraud alert to inform potential lenders that they are on assignment and that their identities should be confirmed before processing any loan or credit applications. Service members have the option of including a contact phone number in the alert. Like a temporary alert, an active-duty fraud alert remains on your credit report for one year unless you choose to remove it.
• Extended fraud victim alert: If you know you've been a victim of credit fraud or identity theft and have reported the crime to the authorities, you can obtain an extended fraud alert. This alert stays on your credit reports for seven years unless you decide to remove it sooner. When you request an extended fraud alert, you must submit a copy of the identity theft report you filed with law enforcement.

How a Fraud Alert Can Impact Getting Credit

While a fraud alert does not have any material effect on your credit report contents or your credit scores, it can cause delays in credit applications. Extra time typically is needed for the identity-verification steps lenders must take when they process applicants with fraud alerts.

This is most noticeable in situations when you're applying for instant credit approval online or at a retailer (seeking a store credit card or approval to buy furniture using store credit, for example). Few automated credit-check systems are equipped to handle the ID verification steps a fraud alert demands, and systems that aren't equipped may balk when they try to get a credit score for a customer who's set a fraud alert.

By law, creditors cannot refuse applications on the basis of a fraud alert. So if your credit meets the loan requirements, the retailer or credit issuer will ultimately approve your application, but the process won't be instant. You will likely need to deal with a company rep in person or on the phone so they can verify your identity.

Monitoring your credit on a regular basis will help smooth the process when you're applying for credit. Experian's free credit monitoring service, for example, will help you understand your credit report and score, and alert you whenever there's a new inquiry.

How to Remove a Fraud Alert

If you place a fraud alert on your credit report and then decide for any reason that you no longer need it, you can remove it easily at the Experian Fraud Alert Center.

While placing a fraud alert at any of the three national credit bureaus automatically initiates alerts at all three, canceling alerts must be done with each bureau individually. The process to remove an alert is quick, but just a little more complicated than adding an alert.

Fraud alerts can be an important tool in combating identity theft. They are easy to activate, and nearly as easy to deactivate. If you're in doubt about the safety of your personal data, or you know you've been a victim of credit fraud, taking advantage of fraud alerts can spare you considerable additional trouble.