Some wrote about fraud alerts as if they didn't expire for years. In reality, only the extended fraud alert lasts seven years -- and you'd know if you had one because you have to submit a copy of a police report documenting the identity theft to get the alert.
Others seemed to believe that creditors must call you to verify new credit applications. In a nutshell, that's not entirely true.
We decided it was time to set the credit record straight.
7 myths about fraud alert:
1. You must have a suspicion of identity theft to raise a fraud alert.
2. The fraud alert requires creditors to call you.
3. You can still get instant credit with a fraud alert.
4. A fraud alert remains on your credit report until you remove it.
5. Fraud alerts remove you from prescreened credit and insurance mailing lists for 90 days.
6. You are stuck with the phone number you provide for verification calls.
7. Once removed, creditors can still see that a credit file once had a fraud alert.
We asked the credit industry about some of the biggest assumptions and added a few other important questions we thought were important to clear up. Clearing the fog of confusion that hangs over fraud alerts, here are the answers to some of the mistaken beliefs fluttering around.
May you be a little wiser about protecting your credit file from identity thieves.
1. You must have a suspicion of identity theft to raise a fraud alert.
While that's generally true, technically, anyone can set up a free 90-day fraud alert at any time. You merely have to claim that you believe you may have been a victim of identity theft. "There's no lie-detector test," says Maxine Sweet, spokeswoman for Experian. Only a seven-year fraud alert requires official documentation to prove the identity theft.
The credit bureaus will honor requests for fraud alerts, unless of course, the consumer doesn't have a credit file with that bureau.
2. The fraud alert requires creditors to call you.
No, it merely asks them to do so. The actual wording of the Fair Credit Reporting Act states that creditors must call the number provided (if one is given) in an initial or active duty alert or take "reasonable steps to verify the consumer's identity and confirm that the application for a new credit plan is not the result of identity theft." The law does not spell out what creditors must do. The creditor may take a number of actions, including calling the consumer at the number provided with the fraud alert, asking the applicant for more identification or simply denying the application. If the creditor does not have the time or the resources to take extra verification steps, the application may get denied.
Only extended alerts require the creditor to call the consumer or contact him in person before granting new credit. Not everyone can get an extended alert -- you must submit a copy of a valid identity theft report as part of the setup process.
Phone number or not, the issuer faced with an initial or active duty alert gets to decide how to treat it. "The credit grantor will follow the policies and procedures it has put in place to best protect the consumer," says Steven Katz, spokesman for TransUnion's TrueCredit.com.
It also depends on whether the application process is automated. Mortgage lending often involves a face-to-face application, which allows for a thorough verification process, says Rod Griffin, public education manager for Experian. With instant credit card approvals, it's often an automated process with no person involved, no way for anyone to call you, he says. In such cases, "They do deny the application rather than call." But even though the application gets rejected, he said he does know that some companies will send the consumers letters asking if they would like to continue their application process in writing.
Automatic denials on in-store credit applications are not a given. Discover Card's vice president of acquisition Mark Scarborough, for instance, says that Discover's policy in instant-credit situations is that a message gets sent to the store clerk to call Discover and put the applicant on the phone. Otherwise, the company will call the consumer "multiple times" until 30 days expire. In the case of a freeze, Discover will send consumers letters explaining how they can complete their credit applications.
3. You can still get instant credit with a fraud alert.
In theory, you should still have the ability to open new credit accounts in the name of Joe Schmo if you are Joe Schmo. But if the issuer's policy is to deny credit applications when the consumer has a fraud alert, you won't get approved. Katz recommends removing the fraud alert in advance of applying for new credit.
Unlike the credit freeze, which lets consumers lift a freeze for one creditor, the fraud alert only offers a global lift.
4. A fraud alert remains on your credit report until you remove it.
Initial fraud alerts expire after 90 days. The active duty alert lasts for one year. Only the extended alert lasts for seven years, and even then does not stay on indefinitely like the credit freeze.
5. Fraud alerts remove you from prescreened credit and insurance mailing lists for 90 days.
While initial fraud alerts expire after 90 days, placing one removes you from pre-screened credit and insurance mailing lists for two years. Extended alerts take consumers off prescreened lists for five years.
6. You are stuck with the phone number you provide for verification calls.
Credit-reporting agencies allow you to change the telephone number you originally listed. If you change numbers, contact the credit bureaus for more instructions. You may be asked to send proof of the new number, such as a copy of a phone bill in your name.
7. Once removed, creditors can still see that a file once had a fraud alert.
Rest assured, once a fraud alert expires or gets removed, it is gone like free money. No new creditors will know and, thus, make credit-granting decisions based on, an old fraud alert. |
