Are you considering a credit freeze or a fraud alert? Both of these options make it more difficult for an identity thief to open a new account in your name, but they don't offer the same amount of protection. If you’re the victim of identity theft—or think you might soon be—read on to get information that can help you figure out which option is best for you.
A credit freeze basically seals your credit history by preventing a credit reporting company from releasing your credit information to a third party. If a thief tries to use your Social Security number and other personal information to apply for a mortgage loan, credit card, or other form of credit, the creditor would reject the application because it couldn’t check your credit score. It won't prevent misuse of your current accounts though. (Learn the difference between a credit report and credit score.)
How to set up a freeze. To protect your file with the three major credit reporting agencies—Equifax, Experian, and TransUnion—you have to initiate a freeze with each bureau. (Learn more about credit freezes, including how to set one up, in What's a Credit Freeze and When Should I Use One?)
How to unfreeze and refreeze your file. Once your credit file is under a credit freeze, creditors will only be able to access your account if you unfreeze it for a specific time period or for a specific company or person. To unfreeze and refreeze your credit file, you’ll need to use a Personal Identification Number (PIN). It’s best to unfreeze at least three days before you apply for credit to make sure the thaw goes through in time.
Cost to freeze your credit files. The cost and requirements for adding and removing a freeze varies from state to state—it usually $10 or less for a freeze—and fees are normally waived for victims of identity theft and sometimes those over age 65. Starting September 21, 2018, the federal Economic Growth, Regulatory Relief, and Consumer Protection Act (Senate Bill 2155) makes placing and lifting a credit freeze free for everyone, no matter where you live.
In most cases, a credit freeze lasts indefinitely (unless you lift it), though in a few states it expires after seven years.
When you place a fraud alert on your credit file, a creditor has to take extra steps to verify the identity of the person requesting credit before proceeding with the transaction. It doesn’t cost anything to place a fraud alert on your credit file.
The following types of fraud alerts are available:
You can request an initial fraud alert if you think that you might become a victim of identity theft. This alert will be placed in your file for 90 days. The alert expires after 90 days, though you can renew it. (Starting September 21, 2018, federal law requires an initial fraud alert to last one year.)
What the alert does. When there's an alert on your file, a business has to take reasonable steps to verify your identity before issuing credit. So, because the business may try to contact you, a fraud alert might delay your ability to get credit.
How to place an initial alert on your credit file. You don’t need to produce an Identity Theft Report or any other documents to set up an initial alert. Simply contact one of the three major credit bureaus—Equifax, Experian, or TransUnion. After you request a fraud alert at one of the three bureaus, your fraud alert will be automatically added at the other two companies.
Other benefits. You can get one free copy of your credit report from each bureau after you place an initial alert on your file.
If you are a victim of identity theft, you can request that it place an extended alert in your file. The alert lasts seven years.
What the alert does. Once an extended fraud alert is in place, a creditor should not grant new credit in your name unless it first takes reasonable steps to confirm your identity by contacting you directly at the telephone number you provided or by another reasonable method you've specified.
How to place an extended alert on your credit file. To place an extended alert on your file, you’ll have to provide proof of your identity and an official report, typically an Identity Theft Report.
Other benefits. You can get two free copies of your credit report from each bureau during the next 12 months after placing this kind of alert on your file. In addition, each bureau must exclude you from lists that it prepares for creditors or insurers with offers of credit or insurance that you did not request (called "prescreened offers") for five years.
If you are on active military duty and want to minimize your risk of identity theft while you’re deployed, you can add an active duty alert to your file. This kind of alert is similar to the other alerts, but it remains in place for a year. Your name is removed from preapproved firm offers of credit or insurance (prescreening) for two years.
To prevent an identity thief from opening new accounts in your name, a credit freeze is considered a much better option than a fraud alert. You should most likely go with a credit freeze if:
In some cases, though, a credit freeze might not be the best solution, like if you apply for credit often, you're trying to get a new mortgage, or you're in the process of changing jobs. Keep in mind you can unfreeze your file with one or all of the bureaus as needed.
Ultimately, you can opt for one or both of these options, depending on what’s right for your circumstances. Whatever identity theft protection method you pick is entirely up to you, but no matter what you choose, you should also regularly get copies of your credit report from each of the credit bureaus. (Under federal law, you may get a free copy of your credit report every 12 months from each credit reporting agency.) Review the reports for all possible signs of trouble, like accounts you didn't open, inquiries you didn't initiate, and defaults and delinquencies you didn't cause. Ask the credit reporting agencies to delete information related to identity theft from your credit report. (Learn about disputing inaccurate information in your credit report.)
To learn more about preventing identity theft or how to handle identity theft after it happens, go to the FTC's identity theft website at IdentityTheft.gov. To learn about state and federal identity theft laws and find other victim resources, visit the Identity Theft Resource Center. For a list of companies that have had data breaches, visit the Privacy Rights Clearinghouse.