Identity theft and fraud have been on the rise for years. While exact numbers vary widely and likely go unreported, the Federal Trade Commission received 4.7 million complaints about criminal activity in 2020 compared to 3.2 million complaints in 2019, with credit card fraud being one of the most common forms of identity theft. .
One painful type of financial crime comes when fraudsters open new credit accounts — apply for a range of credit cards or take out loans — in your name. This can be detrimental to your credit health and take time and effort to resolve the issue. One way to mitigate a potential catastrophe is to set up fraud alerts in your credit files.
“Credit fraud alerts are set up to protect customers from potential fraud, which typically includes stolen credit cards or identity theft,” said Jim Pendergast, senior vice president of the Alabama-based business lender. “It reduces identity theft, which helps everyone: Borrowers can maintain a high credit score while creditors can extend loans to more people.”
How do fraud alerts work?
Fraud alerts are served by the “Big Three” credit reporting agencies Equifax, Experian, and TransUnion. These agencies, also known as credit bureaus, provide lenders and creditors with information about your credit history when you apply for a credit card, car loan, mortgage, home rental, or other type of line of credit.
If fraud alerts are enabled by credit bureaus, and a financial institution or other lender attempts to “pull” your credit report for examination, the lender will have to contact you and confirm that you are the one applying for a new account.
Unlike a credit freeze, which locks out access to your credit report until you “unfreeze,” a fraud alert still allows a potential lender to view your credit report. You can only expect a call to verify that it was your app that triggered the pull request. Fraud alerts do not affect your credit score.
How to set up a fraud alert on your credit files
To set up fraud alerts, you need to contact only one of the three major credit bureaus. Once you request fraud alerts from one agency, that agency must pass on your request to the other two agencies. You can call or submit your information online to start the process.
When requesting fraud alerts online, you will need to provide the credit reporting agency with some personal information, including your name, Social Security number, date of birth, phone number, and current address. If you don’t already have an account with the credit bureau, you may also need to create a username and password during this process – either at the beginning of the process (TransUnion) or before you can verify your application (Equifax).
With Experian, you can enable fraud alerts using a recent credit report number and your Social Security number, or by entering similar personal information. You do not need to create an account to do this.
To remove an alert, return to the same Customer Service page and select Manage Alert (Equifax), Remove Fraud Alert (Experian and TransUnion) or sign in to the credit bureau account you created.
What are the different types of fraud alerts?
Each credit reporting agency offers three types of fraud alerts to credit files. The standard option is a fraud alert for one year, which is renewable at the end of the term. This is the best option for most consumers who fear scams and who simply want to be careful. With Basic Fraud Alert, you get a free copy of your credit report from each office when you submit the application. You can renew the alert every year.
The extended fraud alert lasts for seven years and is available to customers who have experienced identity theft. You must have completed an identity theft report with the FTC, or filed a police report and submitted these documents to the credit bureau, to confirm eligibility. This makes the setup process a bit more complicated, as you will have to apply by mail. However, this option is also free, and you’ll get two copies of each credit report per year for the duration of the alert period.
Finally, active-duty military members can choose the active-duty alert, which lasts for one year and then can be renewed for the duration of the deployment. Placing an extended alert or active service alert will also remove you from the credit reporting agency’s marketing lists for five years and two years, respectively.
Having a copy of each credit report once or twice a year is a useful feature for fraud alerts. However, until April 20, 2022, you can request a free credit report from every bureau every week without going through the fraud alert process. After that, the free rate goes back to once a year.
Should you enable fraud alerts on your credit files?
Short answer: Yes, probably. There is no compelling reason not to add this extra layer of protection to your credit files. And while a fraud alert doesn’t offer a 100% guarantee to prevent identity thieves from opening new lines of credit in your name — it would technically be possible for the fraudster to take the call and confirm your information or raise the alert altogether — it makes it more difficult for them.
If you suspect you may be at risk of identity theft because you lost your wallet or your digital information has been leaked, you should definitely set up a fraud alert – it’s an especially critical first step to take.