Surface cracks in railhead adversely affect the safety, economy and passenger comfort of the railway operation. Although surface cracks are easily inspected and maintained (usually removed using rail grinding if detected very early), often the associated subsurface cracks - if gone undetected - could lead to catastrophic failure of the rail. Therefore, a closer investigation of the subsurface cracks near the surface defects is more pressing. There are many field examination technologies available in the market that would detect the cracks. However, only limited theoretical methods are available for the purpose. Theoretical examination of the effect of surface cracks to the potential damage of the railhead is essential for a comprehensive understanding of the cracks and crack propagation potential. Although finite element modelling could provide solution to railhead damage, extensive effort is required to mesh the crack tip accurately. This paper reports a two-dimensional model based on distributed dislocation theory for fracture problems in finite bodies and applied the theory for the analysis of the surface defects in railheads. Both the boundary of the railhead and the surface defect are modelled as continuous distributed dislocations. This method does not require any meshing and hence saves time significantly. Stress intensity factors are evaluated for the surface defects at various locations of the railhead when the railhead is subjected to different loading regimes. The potential propagation of the surface cracks is also addressed in the paper.