If you think you may become a victim of identity theft or credit card fraud, for example, because you lost your social security card or a business you deal with had a security breach, you can place a fraud alert on your credit report to reduce the likelihood that your identity will be stolen.
What is a Fraud Alert?
A fraud alert notifies anyone who pulls your credit report that your personal information has been stolen. When a business checks your credit and sees a fraud alert, it should take extra steps to make sure the person applying for the credit is actually you. Placing a fraud alert on your credit report is free if you do it yourself, however, if you'll have to pay fee to have a company do it on your behalf.
Two Major Types of Fraud Alerts
An initial fraud alert lasts 90 days. If you believe someone has gained access to your personal information, e.g. your social security number, you can add a fraud alert to encourage businesses to take an extra step in making sure a person taking action on your credit is you. You can re-add the fraud alert after it expires.
An extended fraud alert lasts seven years and is intended for those who have definitely experienced identity theft. To place an extended fraud alert on your credit report, you must provide the credit bureau with an identity theft report from a law enforcement agency.
A third type of fraud alert, an active duty alert, is available to members of the military who are required to go overseas. This alert is similar to the initial fraud alert and lasts a year.
Placing a Fraud Alert On Your Credit Report
You can contact any one of the three major credit bureaus to place a fraud alert on your credit report. The bureau you contact is required to report the alert the other two bureaus.
Both Equifax and Experian provide online forms to put an initial fraud alert on your credit report. All three bureaus require you to place an extended fraud alert (or remove an existing alert) in writing.
Fraud Alert Loopholes
Unfortunately, fraud alerts can't completely protect you from identity theft. If you place an initial fraud alert, a thief might try to steal your identity after the alert expires and has been removed from your credit report.
A thief could try to establish telephone or utility service in your name, and might be successful if that company doesn't check credit in the application process.
Fraud alerts rely on businesses to do the proper checks to confirm your identity. Human error or even negligence could allow a thief to get away even when the fraud alert is in place and the business knows it.
One of the drawbacks of a fraud alert is that it becomes harder to get credit on your own, especially instant credit, because businesses will go through the extra measures to make sure you're who you say you are.
Fraud Alert Alternatives
You might place a security freeze on your credit report which would require you to provide a password or PIN before any credit accounts can be opened in your name.
A credit monitoring service would alert you to certain changes in your credit report allowing you to respond to thefts that slip through the cracks.