Do you need to freeze your credit or put an alert because of a recent identity theft? Your credit report is one of the most important financial documents you have.
It contains information about your credit accounts, payment history, and credit score.
Unfortunately, identity thieves can use this information to commit fraud, so protecting your credit report is essential.
Two ways to do this are through fraud alerts and credit freezes. This blog post will explain the differences between these two options and help you decide which suits your situation.
Before you start, this is why I always recommend building credit at 18 and understanding the consumer laws of credit repair.
What Is A Fraud Alert?
A fraud alert is a notification placed on your credit report that alerts potential creditors and credit reporting companies to verify your identity before extending credit.
There are two types of fraud alerts: initial and extended. An initial fraud alert lasts 90 days and can be placed on your credit report by contacting one of the three major credit bureaus (Equifax, Experian, and TransUnion).
You can easily apply for a fraud alert on any of the bureaus, and it's one of my favorite credit hacks.
An extended fraud alert lasts seven years and requires you to provide a police or identity theft report to the credit bureau.
Do You Need A Fraud Alert?
You probably want to consider placing a fraud alert on your credit report if you suspect you're a victim of identity theft or are concerned about becoming a victim.
For example, if your wallet or purse is lost or stolen, you should place a fraud alert on your credit report to protect yourself from potential identity theft.
Getting your things stolen from you can feel terrible, but the best thing to do is set an alert to protect your credit file. Now, something for our military members. Active duty service members can also place an active duty fraud alert on their credit reports, lasting 12 months.
An active duty alert is perfect for deployed personnel who want to monitor new credit accounts.
What Are The Different Types of Fraud Alerts?
Fraud alerts are like an alarm system for your credit report. You can choose the type of alert you're looking for extended or initial.
An extended fraud alert means businesses must get authorization before opening new accounts in your name.
In contrast, an initial fraud alert validates 90 days and will notify lenders to exercise more scrutiny when you submit a credit inquiry. Lastly, extended alerts last for many years and are used if you’re a victim of identity theft.
So keep your eyes open and protect yourself with these different types of fraud alerts.
What Is A Credit Freeze?
A credit freeze, a security freeze, is a more strict option that prevents credit reporting companies from releasing your credit report without your permission. The companies trying to pull your credit scores will be unable to do so.
This makes it more difficult for identity thieves to open new credit accounts in your name. You can place a credit freeze with the three major credit bureaus.
It's important to note that while a credit freeze makes it more difficult for identity thieves to open new accounts, it will not prevent fraudulent transactions on existing accounts. But at least it will protect you and any new credit requests.
Do You Need A Credit Freeze?
You'll want to look into a credit freeze if you're worried about becoming a victim of identity theft or not planning on applying for credit soon.
For example, a credit freeze can provide added protection for your credit report if you're retired and don't plan on taking out a loan or opening a new credit account using a credit builder app.
How To Setup A Credit Freeze?
To initiate a credit freeze, you'll know to contact every individual credit bureau and submit a form for a credit freeze.
This is much more tedious than fraud alerts, but it's important for nationwide consumer reporting agencies. Every major credit bureau will ask you for security pins; you can't lose those codes.
Once this is done, you must contact local law enforcement and file a police report. This is so you can provide this to any credit reporting agency and prove you were a victim of identity theft.
So, What's The Difference Between A Fraud Alert And A Credit Freeze?
A fraud alert is a notification placed on your credit report that alerts potential creditors and credit reporting agencies to verify your identity before extending credit.
A credit freeze is a more restrictive option that prevents credit reporting companies from releasing your credit report without your permission.
Although they have a few differences, a fraud alert and freeze will protect you from the effects of identity theft. The three credit bureaus everyone knows about still get notified to help you combat identity theft and protect your credit record.
Which One Is Right For Your Situation
The best option for you will depend on your personal circumstances and level of concern about identity theft. If you're concerned about becoming a victim of identity theft or not planning on applying for credit shortly, a credit freeze may be the best option.
However, if you're planning on applying for credit soon or are a military service member, a fraud alert may be a better choice.
Remember, when you place fraud alerts or want to prevent identity theft, you'll need to monitor your credit report for any suspicious activity.
You can do this by regularly checking your credit report from each of the three major bureaus and taking advantage of online monitoring services when possible.
By keeping an eye on your credit report, you'll be able to identify and address any issues that may come up quickly.
You can get free credit scores through credit score apps and apply for initial fraud alerts through credit karma and Experian.
With Credit laws such as the Fair Credit Reporting Act and protocols that can protect your consumer report, it is important to take the necessary steps to protect your credit application process.
Fraud alerts and security freezes are great tools to help you do this. As a consumer, understanding their differences will allow you to choose which works best for you and your personal needs.
So make sure to take the time to decide whether fraud alert vs credit freeze is right for you.
If you request credit and have a fraud alert on your account, don't worry. You can still get credit!
The process may be a bit more frustrating as lenders will contact you as part of their verification process. However, this verification is essential in ensuring that the credit request should be granted.
Keep any email or call notifications from these lenders handy; it's the only way to ensure your credit request goes through without too many hiccups.
One of the most common questions surrounding credit fraud prevention is whether or not a credit freeze is effective.
The short answer is yes. A credit freeze locks down your free credit report, making it more challenging for potential thieves to open an account in your name. That said, it is still important to be vigilant and monitor any changes closely by regularly checking your free identity theft report.
So while a credit freeze is a good practice (with free and low-cost options out there), it won't stop you from taking other steps like checking that report and keeping close tabs on any suspicious activity.
When protecting your existing accounts and personal information, the big question is whether you need a credit freeze or fraud alert.
It can be a confusing decision to make with both of those measures providing great protection. A credit freeze prevents potential lenders from checking your credit score when they receive a credit application, restricting any potentially unauthorized accounts from being opened in your name.
On the other hand, fraud alerts notify creditors that they need to take extra steps when verifying their identity via existing accounts or applications, alerting them if something suspicious is happening.
So while a credit freeze protects your existing account from unwanted third-party access, a fraud alert keeps existing and future creditors vigilant against anything out of the ordinary. Whether you choose one or both depends on how seriously you take your security and peace of mind.
People often get confused about a credit freeze vs. a fraud alert, especially when deciding which is better.
Generally speaking, fraud alerts protect your credit file from being opened by anyone who does not know you or has permission to view it. At the same time, a security freeze will completely lock down your credit file so that nobody can access it without the correct PIN or password.
To make the decision between a fraud alert and security freeze simpler, think of fraud alerts as a padlock and a security freeze as an unbreakable ‘vault’! Both are great tools to protect your credit applications, so you can always use both.