What is a fraud alert and when might a consumer place one on their credit file?

• A. A fraud alert tells lenders to take extra steps to verify identity before opening new credit; it may be placed if identity theft is suspected or for extra protection
• B. A fraud alert freezes credit completely
• C. A fraud alert blocks all inquiries for five years
• D. A fraud alert increases credit limits for a borrower

Answer: (C)

A fraud alert is a notice on your credit report that tells lenders to take extra steps to verify your identity before approving new credit. It’s placed when identity theft is suspected or when you want added protection to prevent unauthorized accounts from being opened in your name. It isn’t a credit freeze, and it doesn’t block all inquiries; rather, it requires lenders to take precautions such as contacting you for verification. There are two main forms: an initial fraud alert lasts about a year, and an extended fraud alert lasts several years. It does not increase credit limits.