How Fraud Alerts Can Affect Credit Applications

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As long as you otherwise qualify, a fraud alert should not (and legally cannot) prevent you from getting a loan or opening a new credit card. But it might slow down the approval process.

How Does a Fraud Alert Work?

If you've placed a fraud alert on your credit report, lenders will know to verify your identity before they process applications for credit or loans requested in your name.

There are special fraud alerts designed for U.S. service members on remote assignment (the active-duty fraud alert), and for victims of identity theft who have submitted fraud complaints to law enforcement (extended fraud victim alert), but anyone can request the most basic type of fraud alert anytime, for any reason.

The most basic fraud alert (known as a temporary fraud alert or an initial fraud alert) expires after one year, as does an active-duty fraud alert. An extended fraud victim alert remains on your credit report for seven years unless you remove it before then. Fraud alerts are free, and you can renew them as many times as you like.

How a Fraud Alert Can Affect Getting Credit

Fraud alerts have no impact on the contents of your credit reports, or on the credit scores based on that information, but they can delay the credit application process. The delays are related to the time required for the extra identity-verification steps lenders must take when they process applications from consumers whose credit reports include fraud alerts.

In many cases (mortgage applications, for example, and some car loans), the applicant won't even notice the extra time required for the extra ID validation. But the time lag can interfere with instant-credit approvals connected with in-store or online applications for credit cards or financing. Automated credit-approval systems may not be equipped to handle the ID verification steps required by a fraud alert, so they may stall the application process as a result.

Law prevents creditors from denying applications because of fraud alerts. So as long as you're qualified for the loan or credit card, the lender will ultimately approve your application. You will likely need to speak with a company representative over the phone or face-to-face for identity-verification purposes—a process that takes a little extra time.

Can I Remove a Fraud Alert From My Credit Report?

Just as a fraud alert is added to your credit report at your request, you can request to have it removed as well. The process is straightforward but just a little more burdensome than placing a fraud alert: When you activate a fraud alert, you can do so at any of the three national credit bureaus (Experian, TransUnion and Equifax), and that bureau will automatically notify the other two on your behalf. But when you want a fraud alert removed before its expiration date, you must submit requests to each bureau individually.

While a fraud alert can be a minor inconvenience to you when seeking instant credit approval, it's a significant obstacle to criminals seeking to impersonate you and borrow money in your name. If you suspect or know your personal data has been exposed or stolen, a fraud alert can be an important weapon in your fight against identity theft.