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Last year, there were over 1 million reports of identity theft, according to the Federal Trade Commission. And we’re on pace for an even higher total in 2024.

Identity theft can have a huge impact on your credit, your finances as a whole, and your mental health. It’s stressful to know someone stole your private information, and it can take months or longer to repair the damage.

One way to protect against identity theft is to put a fraud alert on your credit report. While this could be a valuable layer of protection, you should know about some drawbacks before you try it.

What is a fraud alert?

A fraud alert is a notice you can put on your credit report. It encourages businesses to perform additional verification before they issue credit in your name. For example, you could place a fraud alert and leave your phone number. Lenders would then call you regarding credit applications in your name to check that they’re legitimate.

There’s no cost to put a fraud alert on your credit. A fraud alert lasts for one year, but you can renew it. You can set up a fraud alert online with any of the three credit bureaus:

• Equifax
• Experian
• TransUnion

You don’t need to go through the fraud alert process with all three. Once you place a fraud alert with one credit bureau, it’s required to inform the other two.

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Pros and cons of fraud alerts

Fraud alerts are a good way to protect your credit. When businesses take additional steps to verify your identity, it’s far less likely that any fraudulent accounts will be opened using your information. Setting up fraud alerts is also fairly hassle-free since you can do it online and don’t need to pay anything.

There have been some complaints online about getting fraud alerts removed after they’re in place. This normally wouldn’t be an issue. But some companies may not do business with you while you have a fraud alert in place. It’s not a common issue, but in rare cases, a fraud alert could be an inconvenience.

It’s also important to note that fraud alerts only protect against new account fraud, when criminals apply for credit in your name. A fraud alert won’t protect you if someone steals your credit card number or hacks your bank account.

An alternative option: Freezing your credit

A fraud alert isn’t the only way to keep criminals from opening credit accounts with your information. There’s a credit freeze, which is also free, but you need to set it up with all three credit bureaus.

A credit freeze prevents creditors from accessing your credit report. It effectively shuts down credit card and loan applications right away. That includes your own legitimate credit card and loan applications. For example, if you find a travel credit card that you want to get, you’ll need to temporarily lift the credit freeze first before you apply.

Unlike with fraud alerts, there’s no time limit on credit freezes. They last until you remove them.

Should you put a fraud alert on your credit report?

If you’re worried about identity theft, a fraud alert could provide protection and peace of mind. However, for even stronger protection, you may want to go with a credit freeze. Or, to really cover all your bases, you could do both.

Either of these will make it a bit harder for you to open credit accounts. That’s the tradeoff of having additional protection. If you want to prioritize convenience, you could stick with credit monitoring. Compare your options and choose the one you like the most.

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