How to Easily Remove a Fraud Alert from Your Credit Report
What is a fraud alert?
A fraud alert is a statement that goes on your credit report asking lenders to contact you at a phone number you designate before they issue new credit. Fraud alerts are designed to protect you from identity theft if you fear that your personal information has been compromised. With a fraud alert in place, the issuing credit company should call you prior to issuing new credit. However, anecdotal evidence indicates that some lenders are so eager to get new customers that they fail to initiate this verification process, or don't verify until after the credit has been issued. For this reason, some consumers use a credit freeze instead of a fraud alert to protect their credit reports. What most people fail to realize is that placing a fraud alert on your credit report has unexpected consequences, so a time may come when you need to remove a fraud alert from your credit report.
When not to use a fraud alert.
While fraud alerts theoretically protect you from being victimized in the case of identity theft, some consumers have turned to fraud alerts to 'protect' their credit. A fraud alert is not designed for that purpose. Because some lenders disregard fraud alerts or verify identity after the fact, it's possible for identity thieves to open new accounts without your knowledge, even with a fraud alert in place. Additionally, some credit accounts don't require a credit check - such as some telephone, wireless or bank accounts. In the event that an identity thief attempts to open this type of account, a fraud alert will not protect you. You can place an initial fraud alert, which is valid for 90 days, at any time. However, to extend your fraud alert to 7 years, you'll have to provide a police report as proof that identity theft actually occurred or complete a special affidavit. If you haven't been a victim of identity theft, a credit freeze may be a more effective way to protect your credit.
The hidden cost of fraud alerts.
Many consumers don't think about the hidden cost of fraud alerts. You are exposed every day to special deals and offers if you open a new credit account. Many retailers offer promotions several times per year such as "90-days without payments" or "same-as-cash" financing, and even discounts off large purchases made with a store credit card. If you buy a $2,000 flat-screen television from a big box retailer, that 10% discount for opening a new account saves you $200. You can easily pay the account off before interest rates kick in and the account more than pays for itself. If you've got a fraud alert on your credit report, those instant credit opportunities will be denied. You may have to wait a few days to make your purchase, or loose the opportunity altogether. If a lender cannot reach you at your number, they may deny your credit application entirely.
Indeed, many automated credit application services do deny credit requests automatically when a fraud alert is present on a report. It would cost these companies too much money to provide physical staff when an automated service is present, so it's cheaper and less risky for them to deny your credit request entirely instead of attempting to verify it manually when a fraud alert is present on your credit report.
Beyond instant gratification, though - a fraud alert on your credit report can cost you big bucks on home and auto loans. Some loan companies handle credit approval in-house. They can take a look at your credit report and decide on the spot whether to offer you credit. Unfortunately, with a fraud alert on a credit report, many in-house lenders have to send your loan request out for underwriting. This underwriting process often results in a higher interest rate, anywhere from 0.25% to 1% more interest on your loan. On an expensive auto or home loan, this rate increase could result in thousands of dollars extra over the life of your loan.
How to remove a fraud alert from your credit report.
If you're having trouble getting credit or just want to free yourself from the inconvenience of a fraud alert, you'll have to contact the credit bureaus by mail to have them remove the fraud alert from your credit report. Credit bureaus cannot remove a fraud alert by phone requests. You'll need to send supporting documentation to establish your identity, such as your name, social security number, current and previous addresses, date of birth and telephone number. You may also need to send utility bills or bank statements that were mailed to your current address to prove your identity. Because you're sending such sensitive information through the mail, you should definitely send them via certified mail or overnight service so that you can track your documents.
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