Which action might a borrower take if they suspect identity theft?

If a borrower suspects identity theft, placing a fraud alert is a critical and proactive step they can take. A fraud alert is a notification placed on a person's credit report to inform potential lenders to take extra steps to verify the individual's identity before extending credit. This action serves to protect the borrower from further fraudulent activity by ensuring that creditors are more cautious in approving new credit applications.

When a fraud alert is in place, lenders are required to verify the identity of the applicant. This can help prevent thieves from opening new accounts in the victim's name. It is typically free and lasts for a specified period, usually up to 90 days, after which it can be renewed if necessary.

In contrast, the other actions mentioned, such as applying for more credit, canceling all credit accounts, or simply monitoring accounts, do not effectively address the immediate risk of identity theft. Applying for more credit could worsen the situation by allowing further fraud if the identity of the borrower is compromised. Canceling all credit accounts can lead to unnecessary complications and may not effectively protect against identity theft if the initial accounts were already compromised. Monitoring accounts, while important, does not offer the same level of proactive protection as placing a fraud alert.