Security Freeze vs. Fraud Alert: Which Offers Better Identity Theft Protection?

Credit card fraud and identity theft rank among the chief personal finance concerns that Americans have about our credit cards. Credit card companies and credit ratings firms address these worries with various protection services to protect yourself against fraud, including security freezes and fraud alerts.

These services are free — and easy to use. You can reach out to a credit rating company and order a fraud alert on your credit report. Or you can lock down your credit with a credit freeze, which makes it difficult to access your credit, even for you.

A credit freeze prevents someone from opening credit in your name. A fraud alert asks potential lenders to take extra precautions verifying your identity before granting credit in your name. You can choose both, but one is far more effective. Here’s how to keep the data desperados at bay:   

Fraud Alerts

Fraud alerts tell lenders to take extra precautions when verifying the identity of anyone seeking to use your credit. When asked, credit reporting agencies place an alert on your credit report that warns would-be lenders to take extra steps to make sure of the identity of the borrower.

You might add a fraud alert to your credit reports if you had an account compromised, were the victim of identity theft, or discovered out that one of your creditors suffered a data breach. A recent CNET study showed that scammers target 96% of Americans every week.

Other reasons to use one? If you had your purse or wallet stolen or if you have a common name. People with common names can often discover that a creditor has confused them with someone else with the same name. Clearing up that mistake is not always a simple task.

The Top 10 Most Common Surnames in the United States:

Source: 2010 U.S. Census

Free fraud alerts are one of those identity protection tips that are easy and effective. They have no effect on your credit score. They add a layer of protection on your credit, yet you still have access to your credit report and the ability to open new accounts.

To request a fraud alert on your credit report, contact one of the big three credit bureaus — Experian, TransUnion or Equifax — and ask for it. The bureau will share the information with the other two. You must make a separate request to the smaller fourth credit bureau, Innovis.

Fraud alerts last for one year, but you can re-up for a second (and a third, and a fourth, and so on) 90-day period. Each time you renew a fraud alert, you get a free annual credit report from each credit bureau. It’s a good way to track your credit activity without having to shell out for expensive credit monitoring.

Types of Fraud Alerts

Not all fraud alerts are the same. Among the various alerts are initial fraud alerts, extended fraud alerts and active-duty fraud alerts.

Initial Fraud Alert

An initial fraud alert is one that you register with one of the credit bureaus for the first time. These alerts cost nothing to add and last for one year or until you cancel them before the one-year mark.

When should you ask for an initial fraud alert? When you notice something irregular on your credit report. Look for accounts that you don’t recognize, debts you don’t recall and actions that make little sense, such as the opening or closing of a new account or the hike of a credit limit you didn’t ask for.

Extended Fraud Alert

Extended fraud alerts are major alerts. They can last for up to seven years, and you’re required to deliver significant information to a credit bureau before you can make an alert active.

It asks any business that sees your credit report to contact you to confirm your identity before granting credit in your name, including landlords, insurance companies, car rental agencies, credit issuers and potential employers.

Although an extended fraud alert is also free, it’s designed for people who have experienced an episode of identity theft. You also must fill out an identity theft report from the Federal Trade Commission at IdentityTheft.gov or else provide a copy of a police report you filed because of the incident. Eligible reports are those filed with your state’s department of motor vehicles (DMV), the U.S. Postal Inspection Service or local or federal law enforcement.

Only confirmed victims of identity theft are eligible for this long-term fraud alert.

Besides the lengthy protection you receive from an extended fraud alert, you’re also entitled to two free credit reports a year.

Active Duty Fraud Alert

An active duty fraud alert is a free alert available to active duty or deployed service members. It lasts for one year. All three major credit bureaus offer active duty fraud alerts, but service members must request one to get it.

This alert protects soldiers when they’re not in a position to deal with issues that might arise with their personal credit cards. The protection makes it difficult for someone to open an account in a service member’s name because it prompts lenders and creditors to take extra steps to verify the soldier’s identity.

As a pre-emptive measure, an active duty fraud alert removes participants from marketing lists, both digital and over the mail, for two years. You can opt back into marketing at any point.

Credit Freezes

A credit freeze, sometimes called a security freeze, is the nuclear option. No one gets in, not even you.

A credit freeze bars credit bureaus from providing any information to credit card companies, banks, and anyone else making a credit inquiry. No lender is likely to extend credit without first reviewing your credit report from one of the big three national credit bureaus. It’s a solid barrier to ward off identity thieves.

A credit freeze is free, doesn’t affect your credit score and is easy to acquire. You call one of the three major credit bureaus and ask them to put a freeze on your credit report. You’ll still get a copy of your free annual credit report.

This freeze is by far the most effective way to protect your credit. But like many of the best things in life, it takes a little more effort.

A complicating factor about credit freezes is you get stopped in your tracks, too. If you want a mortgage for a home or condominium, a car loan car, a new credit card or anything that requires a credit report, the lenders won’t be able to access your report.

You must lift the freeze by going online, picking up the phone or mailing a letter. Removal requires proof of identification, your PIN (personal identification number) and could require bank statements, utility bills or other documents.

Fees for lifting a credit freeze vary from state to state and range from $3 to $15. You can lift the freeze temporarily or permanently.

If you change the status of your freeze by phone or online, the credit bureau will place the freeze within one business day or lift the freeze within one hour. Make your request by mail, and the credit bureau must place or lift the freeze within three business days of receiving your letter.

Another option with the same protective power as a credit freeze but a little more flexibility is a credit report lock. The credit report lock also makes it difficult for the bad guys to get at your credit but easier for you to access it.

A mobile app that allows you to lock and unlock your credit reports on your iphone or other device enables a credit report lock, employing usernames, passwords, and Touch ID or Face ID technology. You must lock your credit reports separately at each nationwide credit bureau.

Be aware that a credit freeze, or credit lock, may not stop misuse of your existing accounts or some other types of identity theft. Also, companies that you do business with would still have limited access to your credit report. But the credit freeze or lock is still the gold standard of credit safety.

When you weigh credit monitoring vs. credit freeze, they’re not the same. Credit monitoring is another name for a fraud alert, which puts lenders on notice to verify a borrower’s identity.

If you need more help to improve and protect your credit, another free service is available. It’s a 30-minute credit counseling session by a nonprofit profit agency like InCharge Debt Solutions. The federal government must approve the agency. The companies’ certified credit counselors will provide help with budgeting, solutions for eliminating debt, and money management tips.

Security Freeze vs. Fraud Alert: Key Differences

Here are the key differences between a security freeze and a fraud alert:

Which One Should You Use?

The obvious question you may have now is which one of these financial tactics is better to use?

Fraud alerts work best when you want credit protection but also want to keep your access to your credit. It’s also best as a tool to prevent identity theft — or if you’re already in the middle of an identity theft situation or suspect that you are.

Credit freezes work best for emergency situations, such as when you’ve lost your wallet or purse or had those items stolen. They also help people who got caught up in a data breach or a phishing scam. Credit freezes are also helpful to people who still get bank and credit card statements mailed to them and think they may have had their financial mail pilfered from the mailbox.

One thing to remember is that you can use both financial tools at the same time. The credit freeze blocks access to your credit report. A fraud alert makes it more difficult for someone else to create a financial account in your name. So, the credit freeze and a fraud alert can work in tandem.

How to Place a Fraud Alert or a Credit Freeze

One of the best aspects of credit freezes and fraud alerts is that they’re simple to set up. Follow the steps below.

Placing a Fraud Alert

You’ll need to have your personal information at hand, including your Social Security number, phone number and current address. You may also need your driver’s license number.

1. Contact one of the following credit bureaus by phone or online:

If you place a fraud alert through the mail, you must request a form from the credit bureau of your choice, fill it out and return it. You’ll need to provide more information, including your date of birth, addresses for the prior two years and a copy of a recent bank statement or utility bill.

You only need to contact one of the credit bureaus. Once you register an alert with one, it will contact the other credit bureaus for you and have an alert placed on your account with them.

2. Decide which fraud alert you want, either an initial fraud alert, an active-duty alert or an extended fraud alert.

Placing a Credit Freeze

Similar to placing a fraud alert on your credit-related accounts, when you freeze your credit with one credit bureau, you’re freezing it with all of them. The first company you contact handles that for you with their competitors.

You can freeze your credit online by logging into your account with any of the companies, or you can call one of them. If you call, you must verify your identity and give the company some personal information.

You can also place the credit freeze by mail. You do that by downloading a freeze form from one of the credit bureaus, filling it out and mailing it back. You’ll need your Social Security number, driver’s license or other government ID, pay stubs and a copy of your lease or one of your utility bills.

If you execute your freeze online or by phone, the freeze will happen almost immediately, although the credit bureaus have up to one day to follow through.

Unlike a fraud alert, a credit freeze remains in place until you remove it.

Identity Theft Protection Best Practices

Now that you have a full understanding of security freezes and fraud alerts, let’s get you some other action steps to bolster your credit protection. There are several ways you can upgrade your personal financial security without relying on your creditors or banks.

You can stay ahead of the bad guys with smart habits (regular credit-monitoring and statement-reviewing) and diligent practices (smart password creation and overall awareness of potential scams).

Monitor Your Credit

More banks and credit card companies credit monitoring as a free service. The company will update you monthly or quarterly about where your credit score is and if anyone has used it recently. Consider writing down your credit rating and tracking it.

Review Statements

This is the most basic and responsible action you can take about your personal finances. When you receive your credit card statement in the mail, read it. Make sure there are no unusual purchases. If there are, alert your credit holder. Do the same when you get your bank statements.

Use Secure Passwords and Enable 2FA

Passwords are the first line of defense against fraud, and two-factor authentication (2FA) is the next level up.

We all know the best advice about having secure passwords for our online accounts: Don’t use the same passwords for your important accounts, including email. Also, create a password that is harder to crack, such as a phrase that includes a number, a capital letter and a symbol, such as # or @ or &.)

Better yet, use password-protection software that creates passwords for you but links to your accounts. You can re-set your passwords regularly to stay ahead of fraudsters.

Two-factor authentication means that your online accounts will only let you in after you type in your password and then type in the correct ID code that gets texted to your phone number or email. Some people also use a finger-print scan or a retinal scan as one of their log-in factors.

Sniff Out Phishing Scams

Savvy consumers figure out when an email or text message isn’t legit. But scammers are getting more sophisticated, and some use artificial intelligence to help with their schemes. The easiest rule of thumb to follow is never click on a link in an email or text if you don’t know who that email or text is from. In fact, you’re also better off not responding.

Report Errors or Scams Quickly

If you discover credit card uses you don’t recognize, don’t just put your bank or credit-card statement away. Contact someone quickly and get the fraud or error established. If you work fast, you might correct the problem within a couple weeks.

There are two aspects of your personal financial life that you would be smart to use. The first is identity theft protection. Keeping an eye out for credit card fraud is a part of the digital world we all live in.

One last thought: Do you know what to do if your identity is stolen by a family member? The situation seems unthinkable, but family members under financial stress sometimes steal their child’s identity to gain access to their money.

Credit bureaus don’t keep files on children unless the child was victimized by financial fraud or unless specifically asked by parents

If you’re an adult and a family member steals your identity for financial gain, call one of the credit bureaus, then any affected creditors. You should contact an attorney to help with your fight, which can drag on for many months.

Consumer protection lawyers can explain your options and help you understand your state’s laws about identity theft and restitution. A few states permit other remedies, including penalties of treble damages.