Identity theft leading to fraudulent credit accounts opened in your name can be a pain to rectify and cause long-term damage to your financial well-being. As a consumer, you have two tools at your disposal to limit criminals' ability 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 membership and communications at the National Foundation for Credit Counseling. "Everyone should remain vigilant and check their credit regularly, even if they use fraud alerts or freezes."
Here's what you should know about fraud alerts and credit freezes.
Credit freeze vs. fraud alert: The basics
When you set up fraud alerts on your credit files, lenders and creditors will be prompted to verify your identity before they allow you to open a new credit account. If you — or anyone else — tries to apply for a credit card or loan, you'll get 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 credit lines in your name. If a company tries to pull your credit history to approve an application, they won't be able to view it, which essentially shuts down the application process. You can still complete employment or rental 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
Fraud alerts and credit freezes are both free to consumers. There is no longer a fee to freeze or thaw your credit. Fraud alerts also come with complimentary access to your credit report — once per bureau per year for a basic alert and twice per bureau per year with extended alerts.
Credit freeze vs. fraud alert: The duration
The length of a fraud alert depends on the type of alert you set up. For most consumers, a basic fraud alert is good for one year and can be renewed at the end of the term. Extended fraud alerts, which are available to those who have experienced identity theft and who have completed an identity theft report with the Federal Trade Commission or filed a police report, last for seven years.
Credit freezes last until you thaw them. Credit-reporting agencies generally allow you to temporarily unfreeze your credit file for a set period (days or weeks) so you can apply for a new card or loan, or you can permanently thaw your account. Experian also permits single-lender thaws via a one-time-use PIN that grants a creditor access to your file.
Credit freeze vs. fraud alert: The process
To enable fraud alerts, contact one of the three credit major bureaus: Equifax, Experian or TransUnion. That agency must pass on your request to the remaining 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 have to contact each of the three credit-reporting agencies separately, as they do not communicate these requests with one another. As with fraud alerts, you can complete this process over the phone or online.
|Header Cell - Column 0||Phone Number||Website|
|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'll need to provide the bureau with some personal identifying information, and you may also need to set up an online account if you don't have one already. The process to lift an alert or unfreeze your credit file is generally just the reverse of setting it up in the first place.
Thawing a credit freeze is a little trickier if you need immediate access to your credit, as bureaus say it takes about an hour to restore creditors' ability to see your credit file. If you plan to apply for a new credit line, unthaw 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 don't know which bureau your creditor or lender uses to pull credit, you may have to temporarily lift freezes at all three.
Credit freeze vs. fraud alert: Which one is better?
Both fraud alerts and credit freezes are helpful tools for limiting unauthorized access to your credit and preventing bad actors from opening accounts in your name.
Fraud alerts are a good baseline for most people as a free tool that allows you to continue applying for credit without a lot of hassle (other than taking occasional calls from credit companies). If you expect to open a handful of new credit accounts in the near future, this may be the right option for you right now.
If you have no plans to open up new credit cards or take out loans in the near future, a credit freeze is an even more secure alternative. Credit bureaus used to charge to freeze and unfreeze credit files, which made this option less attractive for many consumers. But now that this service is free, and it's relatively easy to temporarily thaw your file, the extra protection may be well worth it.
But don't stop there. McClary also recommends accessing your credit report regularly and using any security measures and identity verification your financial institutions offer to stay on top of potential fraudulent activity. And if there's a data breach at a company that has your personal data and it offers free identity theft protection as compensation, take up the company's offer.