Todd Christensen, Education Manager
Debt Reductions Services, Inc.
The news is full of massive data breaches at huge retailers, businesses, and even credit bureaus from time to time. Many creditors lose sleep over such hacks. Others may not give it a second thought. They may not even know they have options to protect their identity with tools available through the credit bureaus.
Do Fraud Alerts Protect Your Credit Information?
While not as effective as a credit freeze at protecting your credit report from hackers who already have your information through data breaches, fraud alerts can provide a level of protection many consumers want without inconveniencing them when applying for loans.
The term “Fraud Alert” might convey a false sense of security to consumers who think it will block all potential credit-based fraud. It does not. Keep reading to learn more about fraud alerts, what they do, what they don’t do, and whether it makes sense for you to put one on your credit report.
What Is a Fraud Alert and What Does It Do?
A fraud alert is a notification you can place on your credit report that instructs a prospective creditor to perform due diligence before opening any new line of credit. The notification tells the creditor that you have been or are at risk of being a victim of fraud.
Whether the creditor is a prospective lender, credit card issuer, or retail store, the fraud alert instructs them to take additional steps to verify the applicant’s identity before opening a new card, increasing the credit limit, or sending another card to the account holder. Typically, this involves the creditor contacting the applicant by phone.
How Much Do Fraud Alerts Cost?
There is no cost to add a fraud alert to your credit reports.
How Do You Add a Fraud Alert to Your Credit Reports?
By requesting a fraud alert with one credit bureau, the alert will be added to all three. So, there’s no need to visit all three of the main consumer reporting agencies to add the alert to each one. You add the alert by phone or at the following links: Equifax (888-766-0008), Experian (888-397-3742), and TransUnion (800-680-7289).
How Long Do Fraud Alerts Last?
The standard fraud alerts will remain active for one year. However, if you submit the required documentation (see below), you may add a seven-year fraud alert, also known as an extended fraud alert.
The Problem with Fraud Alerts
Unfortunately, in situations where the fraudster already has the consumer’s personally identifying information, a phone call may not be enough to prevent a fraudulent account from being opened. If the prospective creditor calls and asks the fraudster for your full name, social security number, date of birth, and recent addresses, the fraudster may have no problem providing the answers.
Who is a fraud alert for?
Fraud alerts were created for several classes of consumers who would be at potential risk of becoming future victims of fraud or identity theft:
- Active military members: There is actually a specific fraud alert just for our active service members. This alert remains active for 12 months and requires the consumer to provide proof of active military duty.
- Previous victims: Anyone who has previously been a victim of identity theft or credit fraud should consider adding a fraud alert to their credit report. However, for greater protection, such consumers might think instead of freezing their credit reports. This is also a free service and can be done at each of the three credit bureau’s security freeze management centers online.
- At Risk Consumers: If you have lost your wallet and you fear your personally identifying information has been compromised, you might consider adding a fraud alert to your credit report. For consumers who are going through a divorce or have been in a contentious or abusive relationship, placing a fraud alert on your credit is the minimum you should do. A credit freeze would usually be more appropriate.
When a Fraud Alert Is Not Enough
As noted previously, fraud alerts do not guarantee that prospective creditors will not open new accounts in your name when hackers and fraudsters already have your personally identifying information. For additional protection, placing a security freeze on your credit report will prevent any creditor from opening up a new account in your name.
No creditor should ever open a credit card, store card, loan, or other lines of credit without first accessing the consumer’s credit report. There are exceptions, though. Any creditor who advertises they do not check credit as part of their approval process will not be affected by either an alert or a freeze. These creditors include payday lenders, Rent-to-Own accounts, some online and corner finance companies, and even some car dealerships.
Placing a security freeze on your credit report is free. Plus, you can lift the freeze for free temporarily if you are applying for a new account yourself.
With a freeze, you can continue to use your current accounts as you have, you continue to build your credit rating, and you can continue to make payments on your credit accounts.