What is a fraud alert and why would it be placed?

• A. It indicates a good credit history
• B. It reduces credit limits automatically
• C. It requires lenders to verify identity before extending credit
• D. It blocks all credit applications

Answer: (C)

A fraud alert is a flag on your credit report that prompts lenders to take extra steps to verify your identity before approving new credit. This precaution helps protect you if your personal information has been compromised, making it harder for someone else to open accounts in your name. It doesn’t imply your credit history is good or bad, it doesn’t automatically reduce your credit limits, and it doesn’t block all credit applications. If you want to block new credit more comprehensively, you’d use a security freeze, which is a separate tool.