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Fraud Alert

Adding a Fraud Alert Does Not Hurt Your Credit Score

Dear Experian,

Does adding a security alert raise your credit score or affect it in any way?

- WCB

Dear WCB,

Adding a fraud security alert will not affect your credit scores or your creditworthiness in any way. However, having an alert may delay the approval of a credit application until your identity can be verified by the lender.

What Happens When a Lender Sees My Fraud Alert?

When a lender views a credit report with a fraud alert, it must take certain actions required by the Fair and Accurate Credit Transactions (FACT) Act. Basically, the lender must take reasonable steps to verify your identity before approving the credit application in question. When you add a fraud alert, also called an initial alert, you will be asked to provide a phone number lenders can use to contact you and verify credit applications. In the case of an extended security alert, which lasts seven years, two phone numbers can be provided.

Because of the extra steps required to verify that the application is not the result of fraud, many lenders have set up their automated application processing systems to refer a report with a fraud alert for manual processing.

When the manual review process is triggered, the lender may attempt to contact you and may request additional identifying documentation to verify you are who you claim to be. That could slow the lending process, but should not prevent you from securing credit.

Requests for "Instant Credit" May Be Delayed, but Not Denied

However, there are situations where the manual review process may not be possible. Financing a cellphone or applying for instant credit at a retail store are examples where the credit approval occurs at the point of sale. Sales clerks may not be able to perform identity checks and override the credit review system.

When there is no way for a manual review process to be conducted in those cases, it is our understanding that the lender or store may initially delay the application, rather than put you and the company at risk of fraud. In those instances, you may be asked to call the lender's customer service department, or you might need to submit your application in writing. You may be asked to provide documentation that verifies your identity so your application can be processed in their credit department. In that case, the approval process may be delayed. But for many, the added security is worth any inconvenience.

Contact the Lender Directly if Your Application Was Delayed

Note that banks cannot decline a credit application merely because the applicant has a fraud alert on their credit report. "Instant credit" scenarios clearly present a challenge in this regard.

If you are a fraud victim and have added a security alert or victim statement to your history, understand that there may be a delay in processing your application or request for service. If the automated approval process cannot be conducted, contact the lender directly to ask how your application can be processed.

Thanks for asking.
Jennifer White, Consumer Education Specialist

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