Fraud alerts can help you protect your credit. They add a warning to your credit report that tells lenders to verify your identity before approving new credit, which helps you stay safe from identity theft or data exposure. The alerts reduce risk without freezing your financial life.

In the US, customers reported losing more than $12.5 billion to fraud in 2024, a 25% increase over 2023. Below, we’ll explain what a fraud alert is, how it compares with a credit freeze, and when it makes sense to use one.

What’s in this article?

• What is a fraud alert?
  
• How does a fraud alert work?
  
• What are the types of fraud alerts?
  
• Who should consider placing a fraud alert?
  
• How does a fraud alert differ from a credit freeze?
  
• How Stripe Radar can help
  

What is a fraud alert?

A fraud alert is a notice on your credit report, which is a current snapshot of your credit file (your full credit history). Fraud alerts are signals to lenders indicating that your personal information might be at risk and that any request for new credit should be treated with extra care. A fraud alert asks creditors to verify your identity before extending credit, accepting a customer’s request for an increased credit limit on an existing account, or issuing additional credit cards from established accounts.

Fraud alerts are often free and typically last one year. When an initial alert expires, you can renew it.

How does a fraud alert work?

A fraud alert tells lenders to take extra precautions regarding any new credit requests tied to your identity. The alert appears on your credit report and flags to lenders that your identity could be at risk. This prompts them to take extra care before approving new credit.

When a lender sees a fraud alert, it will contact you to confirm the application’s legitimacy. Placing a fraud alert with one credit reporting agency requires it to share the alert with others. These alerts are time-limited, which means they’ll drop off your credit report after a set period unless you extend or replace them.

Unlike stronger controls, a fraud alert does not prevent lenders from accessing your credit report. They can still review your credit history once verification is complete.

What are the types of fraud alerts?

Fraud alerts are designed to match levels of risk. Some can help ease a general sense of concern, while others deal with confirmed identity theft or extended periods of limited oversight.

Here are the levels:

• Initial fraud alert: This is for people who are or believe they might be at risk of identity theft. The alert lasts one year and instructs lenders to check your identity before approving new credit.

• Extended fraud alert: This option is for people who have experienced identity theft and filed an identity theft report. The alert typically lasts several years; in the US, for example, it lasts seven years.

• Active-duty military fraud alert: This alert is designed for service members who might be unable to closely monitor their credit because of active deployment or other responsibilities. The alert can usually be renewed for the deployment’s duration.

Who should consider placing a fraud alert?

Fraud alerts are most useful when identity misuse is plausible.

You might consider using them if:

• Personal information was exposed: Data breaches, leaked credentials, or compromised databases can surface months later as credit fraud. Early protection is a sensible step.

• Important documents were lost or stolen: A missing wallet, ID, phone, or laptop contains a lot of information. A fraudulent actor could use a stolen or found device to try opening a credit account.

• Irregular credit activity has appeared: Unexpected credit inquiries, unfamiliar account notifications, or lender communications about applications you didn’t submit can indicate someone is testing your information.

• You’re a confirmed victim of identity theft: If fraud has occurred, a fraud alert helps reduce the chance of additional accounts being opened without your knowledge.

• You’re concerned about identity theft: Identity misuse is common enough that some people might choose fraud alerts as a general precaution.

• You expect to apply for credit soon: Fraud alerts work well for people who plan to apply for loans, leases, or cards because they don’t fully block credit files from creditors who might need to check them.

• You manage complex or high-value financial profiles: If your financial situation involves multiple accounts, frequent credit use, or international financial activity, the extra security layer a fraud alert provides might be worthwhile.

• You want protection without ongoing maintenance: Fraud alerts are free and limited in scope. They also don’t require unlocking and relocking credit files, which makes them easier to manage than a credit freeze.

How does a fraud alert differ from a credit freeze?

Fraud alerts and credit freezes have certain things in common: they’re free, they don’t affect your credit score, and they help protect you from fraud. But there are some key differences.

Lender access

A fraud alert still lets lenders see your credit report once their checks are completed. A credit freeze prevents lenders from checking your credit unless you lift the freeze.

Applying for credit

If your accounts have a fraud alert, you can still apply for credit. The process might take slightly longer as the lender verifies your identity. If your credit is frozen and you want to open an account, you must unlock your credit file.

Security level

Fraud alerts rely on lenders. Their effectiveness depends on lenders following verification instructions before approving credit. Credit freezes lock down automatically. With a freeze, no verification can occur unless you allow access to your credit file.

Timelines and expiration

Fraud alerts last for a fixed period and expire automatically unless they’re renewed. Credit freezes remain active until you remove them.

Businesses can use fraud alerts as part of a proactive fraud prevention strategy alongside payment fraud detection tools such as Stripe Radar.

How Stripe Radar can help

Stripe Radar uses AI models to detect and prevent fraud, trained on data from Stripe’s global network. It continuously updates these models based on the latest fraud trends, protecting your business as fraud evolves.

Stripe also offers Radar for Fraud Teams, which allows users to add custom rules addressing fraud scenarios specific to their businesses and access advanced fraud insights.
Radar can help your business:

• Prevent fraud losses: Stripe processes over $1 trillion in payments annually. This scale uniquely enables Radar to accurately detect and prevent fraud, saving you money.

• Increase revenue: Radar’s AI models are trained on actual dispute data, customer information, browsing data, and more. This enables Radar to identify risky transactions and reduce false positives, boosting your revenue.

• Save time: Radar is built into Stripe and requires zero lines of code to set up. You can also monitor your fraud performance, write rules, and more in a single platform, increasing efficiency.

Learn more about Stripe Radar, or get started today.