Financial Fraud Through the Lens of Extended Fraud Alerts

Supersedes Working Paper 19-02 – Financial Consequences of Identity Theft: Evidence from Consumer Credit Bureau Records, Working Paper 20-33 – Financial Consequences of Identity Theft, and Working Paper 21-41 – Financial Consequences of Severe Identity Theft in the U.S.

The immediate effects of fraud for these consumers are negative, relatively small, and transitory. After placing an alert, these consumers experience persistent declines in delinquencies and a 12-point increase in credit scores, and 11 percent of filers become prime consumers. Many of these consumers take advantage of their improved creditworthiness and obtain additional credit. Although alert filers have larger balances, their performance on loans is as good as or better than before fraud, suggestive of a change in behavior following fraud.