One of the techniques that companies offering identity theft protection use to try to keep your identity safer and to keep criminals from opening up new accounts in your name is to use a fraud alert. A fraud alert is a 90-day hold on your file with the credit reporting agencies. What it essentially does for you is require that creditors who want to give you a new account have to go through some extra steps to verify that you really are who you say you are. The idea is that the identity thief, then, won’t have access to enough information to open the account.
In short, a fraud alert is a warning flag on your credit file that lets creditors take extra precautions. However, there has been some speculation that placing a fraud alert on your credit report will, in some way or another, harm your credit scores.
In fact, someone actually sued an identity theft protection company, claiming that their use of fraud alerts caused his credit score to be lowered.
Do fraud alerts affect your credit score?
This, of course, raises an important question. Is the person filing the lawsuit correct? Did his credit score drop because of fraud alerts placed on his credit report from the identity theft protection company?
According to a spokesman for TransUnion, one of the credit reporting agencies, fraud alerts don’t harm your credit score in any way whatsoever. The FICO formula that has been developed to calculate a credit score as an indicator of a person’s credit worthiness doesn’t take fraud alerts into account.
There may be other harmful effects
There are some ways that those fraud alerts could cause some difficulty for you in other ways. For example, it might slow down how long it takes for you to be able to get a loan. Add to that the fact that these alerts are now being used as a safeguard rather than as a response to a specific threat or incident, the lender may pay less attention to the alerts overall.
Ultimately, there are more effective methods of identity theft protection than a fraud alert, and many of the major identity theft protection companies have stopped using them altogether.
