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Explaining Fraud Alerts: What You Need To Know To Protect Your Finances

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What is a Fraud Alert?

Financial fraud has been a growing threat in recent years, with over 2.4 million fraud reports in 2022. Identity theft, investment scams, and impostor scams make up these reports and add up to over $8.8 billion in losses.

The most reported type of identity theft is credit card fraud, with more than 441,000 reports received by the Federal Trade Commission (FTC).

One powerful tool you can use to safeguard your financial well-being and personal information is the fraud alert.

Continue reading to learn what fraud alerts are, how they work, and how to use them to protect your finances.

🔑 Key Takeaways:

Financial fraud, driven by identity theft and scams, surged in 2022 with 2.4 million reports and $8.8 billion in losses.

Credit card fraud tops identity theft types with 441,000 FTC reports.

Fraud alerts are an early warning against identity theft, while credit freezes limit credit report access.

Various fraud alerts, like initial, extended, and active duty, are crucial and cost-free for financial protection.

What is a Fraud Alert?

You may want to place a fraud alert on your credit reports in situations such as when you lose your wallet or credit card. This added layer of security helps deter identity theft and fraudsters using your personal information for financial gain.

Fraud alerts act as an early warning system to protect their credit and personal information. It can also notify you of suspicious activity on your accounts.

💡 Good to Know!

Global credit card fraud losses will skyrocket to $45 billion by 2026.

Placing a Fraud Alert vs. Freezing Credit

Two of the most common measures individuals employ to protect their credit and identity are placing a fraud alert and freezing their credit.

While these terms may seem interchangeable, they serve distinct purposes and have unique advantages and limitations.

You might also wonder how fraud alerts differ from freezing credit.

These two specific measures serve different levels of protection. While fraud alerts inform potential creditors to exercise caution, a credit freeze restricts access to your credit reports entirely.

Fraud alerts are less restrictive and can be placed with national credit bureaus like TransUnion, Experian, and Equifax. It remains in effect for one year and requires lenders to verify your identity before extending credit.

A credit freeze essentially locks your credit reports, preventing anyone from accessing them without your permission. This measure is used when you suspect that your personal information has been compromised or you are not planning to apply for new credit in the foreseeable future.

Both options effectively safeguard your finances, but the choice ultimately depends on your needs and level of concern.

⌛️ In a nutshell:

You have two options to protect your finances: placing a fraud alert or freezing your credit. Placing a fraud alert adds extra security by verifying your identity before granting credit. Freezing your credit restricts access to your credit report, making it difficult to open new accounts.

Types of Fraud Alerts

All types of fraud alerts are free powerful tools that can protect your finances by notifying lenders and financial institutions of fraudulent activity. However, fraud alerts cater to various situations and last for different periods.

Take a closer look at each one below:

For Unconfirmed ID Theft - Initial Fraud Alert

This alert is ideal when you suspect your personal information may have been exposed but haven’t encountered any fraudulent activity yet.

By placing an initial fraud alert, you request creditors to take extra precautions when verifying your identity before extending credit or opening new accounts for at least 90 days. You can call before the expiration if you wish to renew the alert.

For Confirmed ID Theft - Extended Fraud Alert

Suppose you’ve been a victim of identity theft and can provide a valid identity theft report or police report. In that case, you may qualify for this extended fraud alert.

This alert extends the protection period to seven years, making it harder for fraudsters to misuse your information.

For Those on Active Duty - Active Duty

Military personnel on active duty can use an active duty alert to shield their finances while serving. This alert lasts one year and can be renewed according to the period that you are deployed.

⌛️ In a nutshell:

Fraud alerts come in different types based on the situation. An initial fraud alert is for unconfirmed identity theft, while an extended fraud alert is for confirmed cases, providing longer protection. Active duty alerts cater specifically to military personnel on active duty. These various types of fraud alerts offer tailored protection against financial fraud.

Remember, staying informed and taking proactive steps can secure your financial well-being. Understanding these different types of alerts can help you make that first step in placing one for your accounts.

The following sections will guide you to which agencies to approach and how to place a fraud alert.

Agencies in Charge of Fraud Alerts

Federal Trade Commission

If you have become a victim of financial fraud, you can make a report to the Federal Trade Commission (FTC) at IdentityTheft.gov.

The FTC oversees the implementation and enforcement of regulations related to identity theft and provides resources and guidance to consumers.

Credit Reporting Agencies

To set a fraud alert on your account, contact any of the three main credit reporting agencies responsible for maintaining and providing credit reports: TransUnion, Experian, and Equifax.

When you place a fraud alert at any of these agencies, it will notify the other two bureaus and share the information with lenders and financial institutions.

Financial Institutions

Banks, credit card companies, and even financial institutions collaborate in handling fraud alerts.

They receive notifications when fraud alerts are placed and must act cautiously and verify individuals in financial transactions.

Placing Fraud Alerts

Setting up a fraud alert is vital if you’ve lost your credit cards or noticed unauthorized purchases or loans.

Placing Fraud Alerts

If you have any suspicions about risks to your finances, it’s best to be proactive and request an alert to keep your mind at ease. To do that, here’s a step-by-step guide:

Step 1: Contact Credit Reporting Agencies

Reach out to any of the main credit reporting agencies through their website or contact them through call or email. Inform them that you want to place a fraud alert on your credit report.

To contact TransUnion: Call 1-800-680-7289 or visit transunion.com.
To contact Experian: Call 1-888-397-3742 or visit experian.com.
To contact Equifax, call Equifax or visit equifax.com.

Step 2: Fill up a Form

You will need to provide the necessary information, such as your full name, date of birth, social security number, and contact information.

Step 3: Choose Alert Duration

Decide how long you want the fraud alert to remain active; the standard duration is one year. Depending on the type of alert, you can extend it if needed.

Step 4: Monitor Your Accounts

While the fraud alert adds a layer of protection, staying vigilant and regularly monitoring your financial accounts for any suspicious activity is also essential. Report any unauthorized transactions or signs of fraud immediately.

If you wish to lift a fraud alert, you can contact the credit bureau or wait for it to expire. You must contact all three bureaus and provide different requirements for each to lift an alert before its expiration.

✅ Pro-tip!

Always keep clear records of all related documents, transactions, and communications to provide essential evidence when reporting fraud to authorities or your financial institution.

Placing fraud alerts is free, so it’s worth using this resource. Don’t miss out on a chance to enhance your financial security and stay one step ahead of fraudsters.

Bottom Line

Fraud alerts are effective for detecting early signs of fraud and triggering extra verification steps, making them a valuable tool for safeguarding your finances.

Additionally, being informed and vigilant about fraud and the preventative measures available can further enhance our ability to mitigate various online risks.

FAQs.

What happens when I place a fraud alert?

When you place a fraud alert, it notifies lenders and financial institutions that they must contact you to verify before approving credit applications or financial transactions in your name.

Does placing a fraud alert affect my credit?

Placing a fraud alert doesn’t freeze your credit, affect your credit score, or restrict its use. It is only used to ensure no one else has access to your accounts.