Identity theft leading to fraudulent credit accounts opened in your name can be difficult to rectify and cause long-term damage to your financial well-being. As a consumer, you have two tools to limit the ability of criminals to take over your credit: fraud alerts and credit freezes.
“These are good tools for credit protection, but they shouldn’t lead to a false sense of security,” says Bruce McClary, senior vice president for memberships and communications at the National Foundation for Credit Counseling. “Everyone should remain vigilant and regularly check their credit, even if they are using fraud alerts or blocks.”
Here’s what you need to know about fraud alerts and credit freezes.
Credit freeze vs fraud alert: the basics
When you set up fraud alerts on your credit reports, lenders and creditors will be asked to verify your identity before allowing you to open a new credit account. If you – or someone else – tries to apply for a credit card or loan, you’ll receive a call from the lending company, and you’ll be asked to confirm some basic personal information to move the application forward.
A credit freeze restricts access to your credit report and prevents anyone, including you, from opening new lines of credit on your behalf. If a business tries to use your credit history to approve an application, they won’t be able to see it, which essentially interrupts the application process. You can still complete employment or hire applications with an active credit freeze.
It’s important to note that neither fraud alerts nor credit freezes affect your credit history or credit score.
Credit freeze vs fraud alert: the cost
Both fraud alerts and credit freezes are free to consumers. There are no longer any fees to freeze or unfreeze your credit. Fraud alerts also come with free access to your credit report: once per office per year for a basic alert and twice per office per year with extended alerts.
Credit freeze vs fraud alert: the duration
The duration of a fraud alert depends on the type of alert you have configured. For most consumers, a basic fraud alert is valid for one year and can be renewed at the end of the term. Extensive fraud alerts, which are available to those who have experienced identity theft and have completed an identity theft report with the Federal Trade Commission or filed a police report, last seven years.
Frozen credits last until you unfreeze them. Credit reporting agencies usually allow you to temporarily unfreeze your credit report for a specified period (days or weeks) so that you can apply for a new card or loan, or you can permanently unfreeze your account. Experiment too allows single lender thaws via a one-time PIN code that allows a creditor to access your file.
Credit Freeze vs. Fraud Alert: The Process
To activate fraud alerts, contact one of the three major credit bureaus: Equifax, Experian, or TransUnion. This agency must forward your application to the other two, so you only need to go through this process once. You can set up alerts by phone or online.
To freeze your credit, you must contact each of the three credit bureaus separately, as they do not communicate these requests to each other. As with fraud alerts, you can complete this process over the phone or online.
|Equifax Fraud Alert||800-685-1111||https://www.equifax.com/personal/credit-report-services/|
|Equifax Credit Freeze||800-378-4329||https://www.equifax.com/personal/credit-report-services/|
|Experian fraud alert||888-397-3743||https://www.experian.com/fraud/center.html|
|Experian credit freeze||888-397-3742||https://www.experian.com/freeze/center.html|
|TransUnion fraud alert||888-909-8872||https://www.transunion.com/fraud-alerts|
|TransUnion Credit Freeze||888-909-8872||https://www.transunion.com/credit-freeze|
You will need to provide the office with personal credentials and you may also need to create an online account if you do not already have one. The process to raise an alert or unfreeze your credit report is usually the reverse of the initial setup.
Thawing a credit is a bit trickier if you need immediate access to your credit, as bureaus say it takes about an hour to restore creditors’ ability to view your credit report. If you plan to apply for a new line of credit, thaw your credit at least an hour before doing so. Depending on the credit reporting agency, you may be able to schedule a temporary thaw in advance.
Also note that if you are unsure which office your creditor or lender is using to obtain credit, you may need to temporarily lift the freezes of all three.
Credit Freeze vs. Fraud Alert: Which Is Better?
Fraud alerts and credit freezes are useful tools to limit unauthorized access to your credit and prevent criminals from opening accounts on your behalf.
Fraud Alerts are a good foundation for most people as a free tool that allows you to keep applying for credit without much hassle (other than taking occasional calls from credit companies). If you are planning on opening a handful of new credit accounts in the near future, this may be the right option for you right now.
If you don’t plan on opening new credit cards or taking out loans in the near future, a credit freeze is an even safer alternative. Credit bureaus charged to freeze and unfreeze credit reports, which made this option less attractive to many consumers. But now that this service is free and it’s relatively easy to temporarily unfreeze your file, the added protection may be worth it.
But don’t stop there. McClary also recommends accessing your credit report regularly and using all security and identity verification measures offered by your financial institutions to stay on top of potential fraudulent activity. And if there’s a data breach at a company that owns your personal data and offers free identity theft protection as compensation, accept the company’s offer.