How to set up a fraud alert to protect your credit and identity

Identity theft and fraud have been on the rise for years. While exact numbers vary widely and are likely underreported, the Federal Trade Commission received 4.7 million complaints of criminal activity in 2020 compared to 3.2 million in 2019, with credit-card fraud being one of the most commonly reported forms of identity theft.

One painful type of financial crime comes when fraudsters open new credit accounts — applying for a bunch of credit cards or taking out loans — in your name. This can be damaging to your credit health and take time and effort to resolve. One way to mitigate potential disaster is to set up fraud alerts on your credit files.

• The best identity theft protection services
• What to do if your identity has been stolen

"Credit-fraud alerts are set up to protect customers against possible fraud, which usually involves stolen credit cards or identity theft," said Jim Pendergast, a senior vice president of Alabama-based business lender altLINE. "It cuts down on identity theft, which helps everyone: borrowers can maintain a high credit score while creditors can offer loans to more people."

How do fraud alerts work?

Fraud alerts are offered through 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, auto loan, mortgage, home-rental lease or other type of credit line.

If you have fraud alerts enabled with the credit bureaus, and a financial institution or other lender tries to "pull" your credit report for examination, the lender will have to contact you and confirm that you are the person applying for a new account.

Unlike a credit freeze, which locks access to your credit report until you "unfreeze" it, a fraud alert still allows a potential lender to view your credit report. You can just expect a call to verify that it was your application 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've requested fraud alerts from one agency, that agency must relay your request to the other two. You can call or submit your information online to start the process.

When requesting fraud alerts online, you'll 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 request (Equifax).

With Experian, you can enable fraud alerts using the number of a recent credit report and your Social Security number, or by entering similar personal information. You do not need to create an account to do so.

To remove an alert, return to the same customer service page and select "Manage an Alert" (Equifax), "Remove a fraud alert" (Experian and TransUnion) or log into the credit bureau account you created.

What are the different types of fraud alerts?

Each credit-reporting agency offers three types of fraud alerts for credit files. The standard option is a 1-year fraud alert, which is renewable at the end of the term. This is the best option for most consumers who are wary of fraud and who simply want to be cautious. With a basic fraud alert, you get a free copy of your credit report from each bureau when you submit the request. You can renew the alert each year.

An extended fraud alert lasts for seven years and is available to consumers who have experienced identity theft. You must have completed an identity theft report with the FTC, or filed a police report and submitted this documentation to the credit bureau, to confirm eligibility. This makes the set-up process a bit more complicated, as you'll have to apply by mail. However, this option is also free, and you get two copies of each credit report per year for the duration of the alert period.

Finally, active-duty military-service members can select an active-duty alert, which lasts for one year and then can be renewed for the length of deployment. Placing either an extended alert or an active-duty alert will also remove you from credit-reporting agency marketing lists for five years and two years, respectively.

Getting a copy of each credit report once or twice per year is a helpful perk of fraud alerts. However, until April 20, 2022, you can request a free credit report from each bureau every week without going through the fraud alert process. After then, the free rate reverts to once per year.

Should you enable fraud alerts on your credit files?

Short answer: Yes, probably. There's no compelling reason not to add this extra layer of protection for your credit files. And while a fraud alert doesn't offer a 100% guarantee that identity thieves will be prevented from opening new credit lines in your name — it would technically be possible for a fraudster to receive the call and confirm your information or to lift the alert entirely — it does make it more of a hassle for them.

If you suspect you may be at risk of identity theft because you lost your wallet or have had your digital information leaked, then you definitely should place a fraud alert — it's an especially critical first step to take.

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