How Extended Fraud Alerts Could Boost Your Credit Score (Yes, Really)

If you’ve been a victim of identity theft, your first instinct might be to limit damage by placing a fraud alert on your credit reports. Most people assume that doing so signals risk to lenders and might lower their credit score. But new research from the Federal Reserve Bank of Philadelphia suggests the opposite may be true — at least for victims who use an extended fraud alert.

A study published in October 2025 found that consumers who placed extended fraud alerts on their credit reports often ended up with higher credit scores and were viewed by lenders as stronger borrowers. Here’s what the research actually shows, and what it means if you’re deciding whether to use this protection.

What the Federal Reserve Study Found

The Philadelphia Fed analyzed credit bureau data on consumers who experienced fraud and subsequently placed an extended fraud alert — a seven-year flag that requires lenders to verify your identity before approving new credit. The key finding: many of those consumers saw their credit scores improve after the alert was placed.

To be precise, the study looked at a sample of fraud victims and tracked their credit outcomes. On average, those who used an extended alert had higher future credit scores and lower delinquency rates than similar victims who did not. The improvement was especially pronounced for people who had suffered more serious identity theft, such as unauthorized accounts opened in their name.

The results were reported by American Banker and the credit industry trade group ACA International, among others.

Why Fraud Alerts Might Help, Not Hurt

This counterintuitive result deserves some unpacking. After all, a fraud alert announces that you’ve been a victim — why would lenders reward that?

The researchers offer several possible explanations. One is that the alert itself acts as a guard against further fraud. If a fraudster tries to open additional accounts using stolen information, the lender’s verification step can stop them. That prevents new negative entries on your credit report, which directly protects your score.

Another theory is that consumers who take the extra step of placing an extended alert are likely to be more vigilant overall. They may monitor their credit more closely, catch problems early, and manage their finances more carefully. In other words, the alert may be a marker of responsible behavior rather than a cause of the improvement.

Importantly, the study does not claim that the alert causes the score increase. It shows a correlation. But for victims wondering whether the alert will hurt their credit, the evidence is reassuring: no harm, and possibly a benefit.

What This Means for Fraud Victims

If you’re a victim of identity theft, placing an extended fraud alert (or a security freeze) is already standard advice to prevent future abuse. This new research adds a reason to feel confident doing so. It contradicts the fear that lenders will penalize you for being a victim.

It’s worth noting that the study focuses on extended alerts, which last seven years, rather than the initial 90-day alert. An extended alert requires you to submit a police report or identity theft report to the credit bureau. That extra step might be why the effect is stronger — it signals a serious, documented fraud event.

For victims who have not yet placed an alert, the process is straightforward.

Practical Steps to Place an Extended Alert

You can place an extended fraud alert by contacting any one of the three major credit bureaus — Equifax, Experian, or TransUnion. That bureau must notify the other two. You will need to provide a copy of an identity theft report (such as a police report or FTC Identity Theft Report). Once placed, the alert stays on your file for seven years.

Lenders will then see the alert when you apply for credit. They are supposed to verify your identity by calling you or using a one-time code before approving new accounts. This can cause slight delays — a few minutes to a day — but it does not block legitimate applications.

The Downsides to Consider

There are trade-offs. An extended alert can slow down credit applications, especially if you are applying for a mortgage or car loan where the lender needs to contact you directly. Some lenders may also be hesitant to approve credit if the alert makes verification cumbersome, though this is less common.

If you are a fraud victim, the security benefit almost always outweighs the inconvenience. But if you are considering an extended alert proactively — without having been a victim — you should weigh the friction against the protection. The Fed study did not examine people without fraud histories, so its findings may not apply.

Should You Use an Extended Alert?

For victims of identity theft, the answer is clear: the extended alert offers strong protection and, based on the Fed’s data, does not harm your credit. It may even help. If you have not been a victim but are worried about fraud, a standard 90-day alert (which requires no police report) might be a lighter option. Security freezes are another alternative, though they are more restrictive.

The Philadelphia Fed’s work is a reminder that we still have a lot to learn about how fraud protection tools interact with credit scoring. But for now, this study gives victims one less thing to worry about.

Sources:

  • Federal Reserve Bank of Philadelphia, “Financial Fraud Through the Lens of Extended Fraud Alerts,” October 2025.
  • American Banker, “Silver lining? Some fraud victims see credit scores rise: Fed,” October 8, 2025.
  • ACA International, “Fraud Victims Emerge as Stronger Borrowers, Federal Reserve Finds,” October 13, 2025.