What is a fraud alert?

Woman setting a fraud alertImage: Woman setting a fraud alert

In a Nutshell

If you suspect you’ve been the victim of credit fraud or identity theft, you may consider placing a fraud alert on your account with the credit bureaus to better protect yourself.
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You suspect you’ve been the victim of identity theft and you want to take the necessary steps to protect yourself from credit fraud. But where do you start?

Before we discuss the importance of putting a fraud alert on your credit account, let’s talk about what identity theft is.

What is identity theft?

Identity theft is when your personal information is collected illegally and used for a criminal purpose. Personal information includes your name, address, phone number, date of birth, Social Insurance Number and credit card information. For example, if someone accesses your bank account without your permission or takes out credit in your name, this is identity theft.

“When you’ve been the victim of identity theft, it can cause serious harm to your credit health and make it difficult to obtain credit from lenders,” says Laurie Campbell, CEO of Credit Canada Debt Solutions.

Although the total reported dollar loss from identity theft is falling, the number of victims is on the rise. According to statistics from the Canadian Anti-Fraud Centre, the reported dollar loss from identity theft in Canada was nearly $10.5 million in 2014, down from $16 million in 2012. However, the number of victims is up 20 percent between 2012 and 2014.

In today’s increasingly digital world, we need to be more vigilant than ever to protect ourselves against identity theft. Setting up a fraud alert with both credit bureaus makes sense if you suspect you’ve been a victim of identity theft.

For example, if you receive a credit card in the mail that you never applied for or find a loan on your credit reports that isn’t yours, those are signs you could be a victim of identity theft. You may also want to set up an alert if your home has been broken into or you’ve recently lost your wallet — both offer criminals the opportunity to use your stolen information to commit credit fraud.

What is a fraud alert?

A fraud alert on your credit file indicates to lenders that they need to take additional precautions before offering credit.

When you apply for a credit card or line of credit, a lender will pull your credit report to make sure it’s in good standing before approving your application. That’s when they will see the fraud alert. Once a creditor sees that you have a fraud alert, they must take extra steps to verify your identity, which can help stop thieves from opening new credit in your name and may reduce the likelihood of you being a victim of identity theft.

How do you place a fraud alert on your account?

The process of placing a fraud alert is slightly different with each of the credit bureaus.

You can place a fraud alert on your TransUnion® credit account by completing this form. In addition to filling it out, you’ll need to include a photocopy of both sides of your personal identification. You then submit the completed form and ID photocopies by mail or fax. Or, you can call TransUnion at 1-800-663-9980 and follow the automated prompts to place a fraud alert. To place a credit alert on your file, you’re charged a $5 non-refundable fee (plus applicable taxes). The alert lasts six years.

To place a fraud alert on your Equifax® credit account, you can call Equifax at 1-800-465-7166 and follow the voice prompts. Be prepared to supply your SIN and other basic information. The fraud alert is good for six years and costs $6, plus applicable taxes.

If you’d like to extend the alert, contact each bureau to discuss the process.

What should you do if you are notified of a fraud alert you didn’t place?

While fraud alerts can be a great way to protect your credit, it’s possible you could be notified of one on your account that you didn’t place, possibly in error.

If this happens, Campbell suggests you contact the credit bureaus immediately. “Get a copy of your credit reports and check for suspicious/fraudulent activity. You may need to contact government agencies, such as Service Canada, the Canadian Anti-Fraud Centre, your creditors and financial institutions, including those you do not recognize on your credit reports,” Campbell says.

Bottom line

By better understanding what a fraud alert is, you can place one on your account if you suspect you’ve been the victim of identity theft. Each of the credit bureaus has its own fraud alert, so you’ll want to place one with both of them. Fraud alerts last for up to six years, but can be extended or removed by contacting the relevant bureau.

One of the best ways to prevent identity theft is to be cautious with personal information. Be careful about whom you give personal information. When you’re entering your credit card PIN, shield it with your hand from people around you. Take the time to regularly check your bank and credit card statements for any fraudulent charges. If you see anything suspicious, report it immediately and place a fraud alert on your credit files.

In a worst-case scenario, identity theft can result in major financial losses and even filing for a consumer proposal or bankruptcy, so it’s best to avoid it at all costs.

About the author: Sean Cooper bought his first house when he was just 27 and paid off his mortgage at 30 in 3 years. An in-demand personal finance journalist, money coach and speaker, his articles have been featured in publications suc… Read more.