Credit Freeze vs. Fraud Alert

What’s in your wallet? If it’s a Capital One credit card, check again. An identity thief stole the personal data of over 100 million Capital One customers in 2019.

So how can you stop identity thieves from using your information to charter planes to Paris on your card, emptying your bank account, stealing your IRS refund or health insurance, or taking out loans in your name?

It’s a question millions of Americans are asking after the historic Equifax data heist of 2017. According to the feds, Chinese Communist Party hackers stole 148 million Americans’ private financial data from Equifax, one of the big three American credit bureaus.

It’s surprisingly simple to protect yourself against fraud — and it’s free. Unlike a lot of simple, free things it really works. You just order up a fraud alert on your credit report. Or you can lock down your credit in a credit freeze that makes it so difficult that even you can’t easily access your credit.

A credit freeze is designed to prevent a bad actor 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.

Both options involve simple contacts with the credit bureaus. You can choose to do both, but one is far more effective.  Here’s how to keep the data desperados at bay:   

Fraud Alerts

A fraud alert is a notice placed on your credit report warning would-be lenders that you may be a victim of identity theft.

It tells lenders they should be extra careful in verifying the identity of anyone who is seeking use your credit to make sure it’s you! If someone tries to open a new credit card or borrow money in your name, the lender will call you — again, to make sure it’s you!

To request a fraud alert on your credit report, all you have to do is 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 fourth credit bureau, a smaller outfit called Innovis.

There’s plenty to like about placing a free fraud alert on your credit report. It has no effect on your credit score. It allows you to be cautious about your credit, yet you still have access to your credit report and open new accounts, make timely or additional payments, and so on.

Did we say it’s free?

Also, you can re-up for a second (and a third, and a fourth, and so on) 90-day fraud alert period. Each time you renew a 90-day 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.

Extended Fraud Alert

An extended fraud alert places a notice to your credit report indicating to lenders that you are a fraud victim. 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.

The extended fraud alert essentially provides the same protection as a fraud alert except it stays on your report for seven years unless you remove it. It offers longer-term peace of mind than a 90-day fraud alert, but one downside is you miss out on the free credit reports each year.

In addition, an Extended Fraud Alert takes more effort to acquire. You can order a simple 90-day fraud alert the moment you suspect you have been exposed to identity theft, for instance if you lost a credit card on vacation.

But you must be a documented victim of identity theft, like one of the unlucky Equifax 148 million, to place an extended fraud alert on your credit report.

You must document your identity and also provide an investigative or incident report filed with your state’s Department of Motor Vehicles, the U.S. Postal Inspection Service, or law enforcement. You need to fill out an Identity Theft Report at IdentityTheft.gov.

Credit Freeze

A credit freeze, sometimes called a security freeze, is the nuclear option. It’s like putting the cold steel of an Iron Man suit around your credit report.

The 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. So, identity thieves get stopped in their tracks.

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

It’s 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 your dream house or a loan for a new car or a new credit card or any of the things that require a credit report, the lenders can’t access your credit report.

So, 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 have the freeze lifted 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 makes it equally difficult for the bad guys to get at your credit but a little easier for you to access it.

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

Be aware a credit freeze or a 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 some limited access to your credit report. But the credit freeze or lock is still the gold standard of credit safety.

If you need more help improving and protecting your credit, another free service is available. It’s a 30-minute credit counseling session by a federally approved nonprofit profit agency like InCharge Debt Solutions. Their certified credit counselors will provide help with budgeting, solutions for eliminating debt, and money management tips.