How Credit Freezes and Fraud Alerts Work
Knowing how to safeguard your credit information can be difficult. Some people are wary to even swipe their credit card at checkout! This makes understanding how to protect your credit, personal and financial information even more critical. The three national credit bureaus (Experian, Equifax and TransUnion) can help you identify and prevent identify thieves from fraudulently using your information. One of the first action steps you can take when you think your credit has been compromised is contact the bureaus and request a credit freeze or fraud alert on your credit report. Let’s take a look at what it means to take those steps.
What is a credit freeze?
Initiating a credit freeze means the credit bureaus will not issue your credit report to anyone, most likely preventing a new credit account or loan to be opened on your name. Depending on your situation, this could be the best way to protect yourself against identity theft. However, this often involves a fee for both placing and removing the freeze, usually between $5 and $10. Another consideration is that you will have to call each of the credit bureaus individually to request the freeze.
Under a credit freeze your credit report may still be accessed by certain entities such as your current creditors or collection agencies acting on their behalf and governmental agencies acting upon a court or administrative order.
What is a fraud alert?
A fraud alert requires creditors to verify your identity before a new credit or loan account is opened. This involves the lender or creditor contacting you and verifying that you are in fact the person applying for the credit. To issue a fraud alert, you only need to call one of the three credit bureaus to place an alert with all three credit bureaus. A fraud alert is free, and it lasts for at least 90 days while an extended, 7-year fraud alert is available to victims of identity theft.
Will a credit freeze or fraud alert affect my credit score?
No, your credit score is not impacted in any way by either a credit freeze or fraud alert.
How do I know which one to choose?
Only you can decide when and if a credit freeze or fraud alert is best. If your personal information has been compromised (name, Social Security number, address, date of birth, etc.) it is probably best to place a fraud alert, at minimum. If you don’t anticipate applying for new credit and want to protect your personal information, you may consider placing a credit freeze, which can temporarily or permanently be lifted (at a cost) when you apply for new credit or loans.
During either a credit freeze or fraud alert, you will have continued access your credit report and scores through any of the free credit report websites, such as Credit Karma and AnnualCreditReport.com. Before accessing your credit report, learn more about what you should know about free credit report websites here.
Be aware that neither a credit freeze nor a fraud alert will prevent thieves from accessing existing credit accounts if they have the information in their possession. Be sure to monitor your existing accounts regularly, even if you have a credit freeze or fraud alert in place, to watch for any activity or charges that you don’t recognize. If you notice any suspicious activity, contact your banker or credit bureau right away.
At the end of the day, regardless of whether you initiate a credit freeze or fraud alert, I advise you to regularly review your credit accounts to ensure that you, and only you, are the person spending your hard-earned money.