Your credit report and credit score are very important to your overall financial life. They are worth the effort to protect for several reasons. They can impact the interest rates you’ll be offered on a mortgage, car loan, or credit card. They can also influence whether a landlord will rent to you or even whether you will be offered a job for which you have applied.
What is a credit report?
Credit reports are documents created by credit bureaus, such as Equifax, Transunion, and Experian, that summarize your credit activity and how diligently you pay your creditors on time and according to the terms of your credit agreements. It’s a good idea to learn how to check your credit report and to do so periodically.
Credit reports also contain your credit score: all your activity summarized in a single score. Different credit bureaus may calculate your credit score differently, but in all cases, credit scores are based on all the entries on your credit report.
Fake entries can wreak havoc on your score and may be an indication that your identity has been stolen. If you discover one on your credit report, it’s essential that you take steps to remove it and prevent further fraudulent entries. That’s where fraud alerts come in.
What is a fraud alert on a credit report?
A fraud alert is a notice you can place on your credit report to alert creditors that they should take additional steps to verify your identity before opening a new account in your name. Placing a fraud alert on your credit report is a free service. It is not difficult to do, but there are specific steps you must follow to take advantage of the service.
How to Place a Fraud Alert on Your Credit Report
Fraud alerts offer consumers many benefits if used wisely. However, it is important to follow the proper steps when taking advantage of the device. The process can be broken down into three steps.
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Contact the three major credit bureaus
There are dozens, if not hundreds, of credit bureaus. But for most consumers, there are three main agencies to consider when filing a credit fraud alert: Experian, TransUnion, and Equifax. These credit bureaus do not necessarily communicate with each other or share information. Therefore, if you suspect you have been a victim of fraud, it is best to contact each of them individually.
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Choose the type and length of the fraud alert
There are three different types of fraud alerts available. Your circumstances will determine which type of alert is most appropriate.
Initial Fraud Alert
If you’ve been the victim of fraud or if you learn that your data has been breached (losing your wallet is a good reason, as is a data breach suffered by a company you do business with), it’s smart to file an initial fraud alert with the three major credit reporting agencies. Initial fraud alerts last for one year, but can be renewed at the end of the one-year period.
Extended Fraud Alert
An extended fraud alert is similar to an initial fraud alert but lasts for seven years without renewal. It is available to individuals who can prove they have been victims of identity theft. To apply for an extended fraud alert, you will be asked to provide a copy of a police report or Federal Trade Commission (FTC) report confirming identity theft.
Active Duty Military Alert
An active duty military alert is a one-year alert that is available exclusively to active duty military personnel and their dependents. To place an active duty fraud alert, you must provide a copy of your military ID card. Choose this alert if you have been a victim of fraud and are eligible for current military service or are a dependent of a service member.
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Obtain confirmation of the fraud alert by monitoring your credit report.
The easiest way to confirm that you have successfully placed a fraud alert on your credit report is to actively request a copy of your report. You can download free copies of your credit report once a year by visiting this link: https://www.consumer.ftc.gov/articles/0155-free-credit-reports.
You can also contact the three credit reporting agencies by telephone. You will need to provide identifying information when you call.
What is the difference between a fraud alert and a credit freeze?
Some people confuse a fraud alert with a credit freeze on an account, but the two work differently. A fraud alert on your credit report requires creditors to verify your identity before processing credit applications, while a credit freeze prevents creditors from accessing your credit report for a period of one to seven years. Adding either option to your account is free.
What can a credit freeze accomplish that a fraud alert cannot?
The main difference between the two is that with a credit freeze, creditors will not be able to access your credit reports at all while the freeze is in effect.
The disadvantage of freezing your credit is that if you want to apply for credit, creditors will not be able to access your report. You must request that the credit freeze be removed or you will not be able to apply for a mortgage, personal loan, or even a store credit card.
Does a fraud alert affect your credit score?
Placing a fraud alert on your credit report will not affect your credit score. However, fraudulent purchases made with your existing credit accounts can have a negative impact. That’s why it’s so important to monitor your statements and credit report – it’s critical that you report any unauthorized purchases to your creditors immediately.
