I recently placed a 90-day fraud security alert on my credit history though Experian. Will that affect my ability to be approved for a mortgage?
A fraud security alert could slow down the mortgage approval process, but it shouldn’t stop it altogether. Your lender is required by law to take reasonable action in response to the security alert. That means it must take additional steps to verify your identity. That could be by calling a number you provide, or you could be asked to provide additional documentation.
As a result, mortgage loan processing will be forced out of a rapid, automated system and into a manual review process, which is much slower. That could cause problems if you are facing tight deadlines for closing the loan. A security alert will prevent you from getting other types of credit, particularly those that involve instant approval, for example submitting a credit application at a retail store to receive a discount. Such processes are entirely automated. There is no way to conduct a manual review.
As a result, the lender may simply decline the application because of the alert. By adding the alert you indicated you had reason to believe you were a victim of credit fraud or identity theft. To protect you, the business simply declines the application. Other lending situations might also be affected, even if approval is not instant. Credit application processing is automated, efficient and inexpensive. A fraud alert often causes the application to be rejected from the automated process. Many creditors have no way to manually evaluate a credit report.
Also, if manual review expertise and identification verification is required, it may cost more to open the account than the lender anticipates making in profit. Some lenders may, as a matter of policy, choose to decline applications when a fraud alert is present.
Security alerts should not be added unless you have reason to believe you are a victim or you are at increased risk of victimization for some reason, such as a data security breach about which you have been notified. Alerts should not be used as a preventative tool. False alarms cause the alerts to be less meaningful to creditors. Fraud alerts are intended for victims.
Thanks for asking.
The “Ask Experian” team