Whenever you place a fraud alert on your credit report, a lender gets notified of this whenever he accesses your credit report. A fraud alert requires that the lender takes extra steps to verify the identity of the applicant. It requires that steps be taken to manually verify the identity such as calling the consumer and asking for additional documents to verify identity.
In most cases of loans such as a mortgage loan, automobile loan etc. the process of the approval for the loan can get slowed down by the presence of a fraud alert, although never completely stopped by it.
Other effects of a fraud alert are that you do not get automated credit approvals for offers like instant car loans or pre-approved home loans. Since these systems are completely automated and do not choose people manually, they ignore the credit reports of consumes with a fraud alert on them.
You may also not qualify for certain credit offers that are fully automated such as departmental credit cards for a discount. These processes are also automated, instant and low cost. A presence of a fraud alert automatically causes the system to reflect the application and the vendor had no way of verifying your identity manually.
Because of these reasons, bear in mind that a fraud alert is to be used only when you think that you have been a victim of identity theft and if you suspect that sensitive financial data has been stolen. It is not meant to be a safety or a precautionary method to prevent identity theft.