How to Use a Fraud Alert to Prevent Identity Theft

Thief stealing hacking into computer
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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 prevent identity theft.

What is a Fraud Alert?

A fraud alert is a note on your credit report that warns anyone who pulls your credit report that your personal information has been compromised.

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 if you hire a company to do it on your behalf.

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 will 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 could try to steal your identity after the alert expires and has been removed from your credit report.

A thief could use your identity to apply for services that don't require a credit check in the application process, like some telephone or utility services.

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

security freeze offers more security than a fraud alert because it locks your credit report and requires you to provide a password or PIN before any credit accounts can be opened in your name.

You might also consider using a credit monitoring service to alert you to certain changes in your credit report. Monitoring your credit allows you to respond to thefts that slip through the cracks.