Victim of Fraud? Here’s What It Means for Your Loan Application

When you apply for a business loan, a credit card, or any type of credit account from a lender, there’s always a chance that you could be denied.

Unfortunately, there are a number of reasons why a creditor might be hesitant to work with you or your business—creditworthiness, length in business, annual revenue, a lack of collateral, and so on. These are the regular culprits of why some business loans get denied.

Here’s a loan denial reason you might not have been expecting—fraud.

What happens when a lender sees fraud on your credit report and passes on your loan?

Here’s what you need to know about credit fraud (and how to get false alarms off your credit report).

What’s a Fraud Alert?

Did you know that every two seconds, an American is subject to identity theft?

With over $16 billion stolen from 12.7 million fraud victims in 2014, there’s a significant fraud threat to consumers.

Different regulatory bodies and financial institutions take steps to protect American consumers from all kinds of scammers out there.

So when you get a fraud alert on one of your credit reports, that’s the different credit reporting bureaus attempt to protect you from new account fraud, or identity fraud.

New account fraud is, generally, any type of fraud that occurs within 90 days after a new account is open under your name.

Scammers committing new account fraud are in it to use these accounts solely for committing fraud—opening new credit card accounts or applying for new lines of credit or loans in hopes for quick access to cash. This can be a particularly damaging type of fraud—not only are scammers using your identity to steal money, they’re hurting your credit rating in the process.

Credit card issuers and credit reporting agencies try to stay ahead of these scammers, detecting when purchases or account openings aren’t really you.

So if you’ve received a fraud alert on your credit report, that’s Transunion, Experian, or Equifax telling lenders and creditors to watch out—the person applying for a new credit account might not be who they say they are.

Got a Fraud Alert? Here’s Why

Now, you could have received a fraud alert on your credit report for a variety of reasons.

An actual scammer could be applying for a bunch of different credit accounts in your name, which could look suspicious to the credit reporting agencies.

In this instance, you might not know when you receive a fraud alert—maybe until a lender notifies you that you have, or you check your credit report yourself.

However, if you suspect that you’re a victim of fraud, or have been a victim of fraud in the past, you can ask the credit reporting bureaus to set up fraud alerts for you.

In this case, you actively ask the bureaus to use their fraud detection technologies on your report.

That way, if there’s anything inconsistent in your credit opening activities, the reporting bureau will put a notice on your report—essentially telling creditors and lenders to double check that the person applying for credit from them is actually you.

You can set up fraud alerts for just a short, temporary period of time (usually 90 days). Or, if this is an ongoing problem for you, you can request an extended fraud alert—lasting up to 7 years.

How Can a Fraud Alert Affect Your Loan Application?

So you’ve applied for a business loan or you’re looking to open your next business credit card, and you have a fraud alert on your account.

When a fraud alert appears on your credit report, a lender or creditor is required to at least take extra steps to verify your identity on the application. To reach out to you, a lender could simply give you a call to chat and get your confirmation. (Make sure that when you do apply for credit, you put the correct contact information on your application so that creditors can reach out to you!)

This verification step will, unfortunately, delay the whole application process.

And in some cases, a fraud alert could bar you from prequalifying for certain loan products.

If you’ve signed up for a temporary fraud alert, or have requested an extended fraud alert a while back, then this shouldn’t come as a surprise to you. You’ve actively requested lenders to take extra precaution when reviewing your account, just in case the application wasn’t authorized by you.

But what if you haven’t set up these alerts, and your application was intentional—fully completed by you—but you’ve been denied?

Here’s what you can do.

How to Get Fraud Indicators Removed from Your Report

First off, if you’ve intentionally set up fraud protection on your profile and no longer want them on your account, you can simply reach out to the credit reporting bureaus.

Of course, to avoid further scamming, the credit reporting bureaus will have to be absolutely sure that it’s you requesting for fraud alerts to be removed.

To request that fraud detection be removed from your profile, you’ll need to send the request in writing.

And if you don’t have fraud detection actively set up—but you’ve gotten a false fraud alert and you’ve been denied credit because of it—removing the alert is actually the same process.

You’ll have to formally write the credit bureau that reported the fraud and submit an application for it to be removed. (You can find the application on any of the bureaus’ fraud centers.)

But of course, before you dismiss this fraud alert as mistaken, make sure that there isn’t actually something fishy going on with your account—especially if you’ve been a victim of fraud before. Taking steps to verify the alert will protect you from potential credit damage down the line.

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Fraud reporting (as it relates to your credit) is just another reason why all consumers and business owners should be closely monitoring their credit.

If you’re aware of all of the ups and downs of your credit report, you’ll know when something isn’t right—saving you time during the loan credit approval process.

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