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Select a topic from our most recent column – July 27, 2005

The unforeseen consequences of adding a fraud alert when you are not a victim

Dear Max,

I put a security/fraud alert on as a preemptive measure and have had nothing but difficulty since. I have a credit score over 750 yet have twice been denied credit. The credit card company said it could only process my application if I knew the month and year I added the alert, yet I can't reach a live operator at Experian. How do I unlock this thing or find out that date info? I feel paralyzed by my own doing.

- GLE

Dear GLE,

Fraud alerts are not intended to be preemptive tools for the reasons you describe. In order to protect you and them, lenders are required to take additional steps to verify your identity before granting credit. That sounds pretty innocuous, but it isn't.

Credit card companies usually employ automated application review processes. As a result, there may be no way to conduct a manual review, which is necessary when a fraud alert is present. Therefore, your application may simply be declined because it cannot be processed.

In your instance, it sounds like the application was reviewed, and the lender needs more information from you about the alert. In order to get your credit report, you will need to request it in writing. That is because by adding the statement you claimed to be a fraud victim. As a result, Experian needs to verify in writing and with copies of appropriate documentation that you, and not an identity thief, are asking for the information.

Mailing documentation back and forth is necessary to protect victims. However, it will dramatically slow the lender's application process, or stop it completely. Such delays can have serious implications. For instance, inability to replace a broken cell phone can be a major frustration. Similarly, slowing a mortgage application to verify your identity because of a fraud alert could result in a higher interest rate. That can cost thousands of dollars over the term of the loan.

When you are truly a victim, such delays and inconveniences are acceptable to the alternative of further fraud. True victims also tend to be better informed about the implications of such alerts before adding them and do so with an understanding of the problems the alerts may create.

Non-victims, such as yourself, often add the alerts without being fully informed about the consequences. Today there are far better tools to alert you to potential fraud without falsely claiming to be a victim.

The most obvious is that you can get your credit reports free once every 12 months. If you have no reason to believe you might be a victim, that may be sufficient. If you are extremely concerned about fraud, as you seem to be, a credit monitoring service is a better alternative. With a service, such as Credit Expert, you will get immediate notice when something new is added to your credit history, including a simple inquiry. Neither option will have any impact on your ability to get credit.

You will need to submit your request to remove the alert in writing along with copies of identifying documents. Again, Experian needs to verify you are making the request, not an identity thief who wants access to your credit report.

Thanks for asking.


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