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Why January Is the Month to Put a Fraud Alert on Your Credit Report

Credit card hand off.

Your credit report includes very important documentation of your credit history, which is used by lenders to assess risk. It's also used by employers and other agencies which have a vested interest in how well you manage your credit and finances. For this reason, it is imperative that you not only take the necessary steps to improve your credit management but also remain abreast of the information reported to the credit bureaus.

Related: How Credit Bureaus Experian, Equifax and TransUnion Rose to Power as the "Big Three"

It is not the job of the credit bureau to determine if the information on your credit report is correct; this responsibility falls on you. With this in mind, you should take advantage of the opportunity to review your credit report for free at least one time annually from each reporting bureau. It is during this annual review that many consumers discover fraudulent activity on their account which may be an indication of identity theft or credit card fraud. If you suspect you're a victim of either credit card fraud or identity theft, the first step you should take is placing a fraud alert on your credit report.

What Is a Fraud Alert?

When you request a fraud alert to be placed on your credit report, you are asking the credit bureau to place a special alert on your report that will notify those who pull it or businesses that honor credit card accounts that fraudulent activity is suspected. This should in turn result in that business or lender taking extra steps to confirm the identity of any person trying to establish or use credit in your name.

Placing a Fraud Alert on Your Credit Report

If you believe you have been a victim of identity theft, credit card fraud or suspect you might be vulnerable to these crimes, you can contact any one of the three credit bureaus to request a fraud alert to be placed on your credit report. In contacting one credit bureau, they also report the fraud alert to the other two remaining bureaus.

Once you have requested that a fraud alert is placed on your credit report, that initial alert will remain in place for 90 days. During this time, anyone who reviews your credit report will be alerted to the potential fraudulent activity and should take special precautions before approving credit.

If you have proof that you are a victim of identity theft (you have filed an identity theft report with a law enforcement agency), you can request an extended fraud alert which will be in place for seven years.

Protecting Your Credit

A fraud alert is just one step that can be taken to protect your credit from identity thieves. Since the success of a fraud alert depends largely on the actions of potential creditors and businesses, it is not a surefire method of protecting your credit. Other alternatives include a credit freeze or credit monitoring service. A credit freeze will prohibit potential lenders and other third parties from reviewing your credit report, while a credit monitoring service will monitor activity on your credit report and alert you to changes that take place.

This article was contributed by Ryan Guina of GOBankingRates.com, a leading portal for personal finance news and features, offering visitors the latest information on everything from strategies on saving money to getting out of debt.

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