If you’ve ever had a major issue involving your credit report (for example, if your identity gets stolen), you probably dealt with a fraud alert, a credit freeze, or both.
The fraud alert and the credit freeze are two tools that credit bureaus can use to protect your credit report. They’re related and often confused for each other, but these are two separate things with separate applications.
There are times when a fraud alert makes sense, and times when a credit freeze makes sense. Do you know which one is right for you? Let’s discuss.
According to Equifax, one of the major credit bureaus, there are three types of fraud alerts that can be placed on your credit report:
● An initial fraud alert, which lasts 90 days
● An active duty alert, which lasts one year (only available for active duty military personnel)
● An extended fraud alert, which lasts for seven years.
Initial fraud alerts entitle you to one free credit report from each of the big three credit bureaus (Equifax, TransUnion, and Experian). Typically you’re only able to receive one free credit report each year, so you choose one bureau and pay for the other two, or just stick with the free one and hope it turns up any issues.
You can also request that only the last four digits of your social security number appear on your credit reports, if you’re interested in taking that extra measure of security.
The active duty alert protects you when you’re serving in a location apart from your usual duty post, and it will also remove your name from pre-screened credit card offers for two years.
If you know you’ve been a victim of identity theft and there’s fraudulent activity on your credit report, your first step is to go to the police and receive what’s called an Identity Theft Report. Once you have your Identity Theft Report in-hand, you can call any of the major credit bureaus and request an extended fraud alert.
After the extended fraud alert is placed, that credit bureau will forward the alert to the other bureaus. It typically takes less than 24 hours for all three bureaus to show your alert.
Once the alert is placed, you’ll be able to receive two additional free credit reports from all three bureaus and your name will be removed from the pre-screened credit card offer lists for five years.
Fraud alerts are free from all major bureaus.
As Equifax puts it, “fraud alerts are like ‘red flags’ for anyone looking at your credit file.” They let any potential creditors know that there’s been some suspicious activity on your account and that your newest credit request warrants a closer look.
This is a protective measure, not a “value judgment” of any kind. The goal is to make sure that no more fraudulent activity takes place in your name.
You want this as the consumer, because it’s a complete nightmare to clean up identity theft. Creditors want this because they’re often on the hook for purchases made fraudulently.
A credit freeze, also called a security freeze, is a major step toward protecting your identity when there’s a problem. What the freeze does is prevent anyone from seeing your credit report, including creditors. The credit bureaus are banned from giving out your credit information to anyone.
There’s a work-around, though, which can be useful in those instances when you need to open a financial credit account. When you set up the security freeze, you’ll get a code number (almost like a PIN) that you can use when you want to apply for credit somewhere.
Using that code will grant the credit bureau the ability to send your credit file just to that potential new lender.
The code is just for new creditors, though. Creditors you’re already doing business with will still have access. This includes things like mortgage lenders, existing credit card accounts, and cell phone companies. Your information will also still be available to debt collectors, so you aren’t off the hook there.
Credit freezes never expire. Instead, you have to request their removal. Most states require a fee to place and/or remove a security freeze.
There are benefits and drawbacks to both tools. They can be used together for strong protection after the fact when there’s been fraudulent activity in your name, and neither tool is permanent, which means you’ll be able to move past any negative incidents in due time.
Fraud alerts generally are for when there’s suspicious or confirmed fraudulent activity on your account. (The exception is the active duty alert, which is a preventative measure).
They’ll still allow you to receive credit, but they require a bit more verification to be sure that the person applying is really you.
Credit freezes also still allow you to receive credit whenever you want, but they require the “secret code” from you any time there’s a new creditor looking for your file. You’re personally involved in every decision about who may and may not look at your credit file, and only the ones you approve will be able to get in.
This security freeze gives you a ton of control over who looks at your credit file. They’re highly effective at preventing an identity thief from opening new credit accounts under your name, but they won’t prevent someone from fraudulently using your existing accounts (credit cards you already have, etc.).
There’s also no requirement to have fraudulent activity to “qualify” for a freeze. You can request a freeze any time, and have it lifted any time. There may be fees associated with doing this, though.
Plus, there’s no removal from the direct-mail credit card offers.
Fraud alerts and security freezes are two great tools that work well in specific circumstances. Fraud alerts are most often applied only to situations where there’s been fraudulent activity, and they should be used for your own protection.
The credit freeze is widely available and a great protective measure against identity theft if you’re willing to shoulder the fees and the extra effort of using the secret code.
Have you ever had a credit freeze or fraud alert on your credit report? What were the results for you?