Return to The Money Mentor Blog

Identity theft protection: Fraud alerts and credit freezes

March 06, 2015

By Pam Leibfried

It’s National Consumer Protection Week!

In my identity theft post Tuesday, I wrote about being a past customer of Anthem Blue Cross, and facing the reality that I may now be at a higher risk of having my identity compromised or being a victim of credit fraud. Today I’ll share some information about two ways that you can reduce the chances that such financial fraud will occur: fraud alerts and credit freezes. Here’s a simple summary of what these credit protection options do and how they differ: A fraud alert allows creditors to get a copy of your credit report after they take steps to verify your identity, while a credit freeze locks down your credit.

Fraud alerts

What a fraud alert does. A fraud alert notifies potential creditors that you believe you are at risk of identity theft. When you have an active fraud alert, the credit reporting companies must contact you to confirm than any request for your credit information (for a loan, credit card, apartment rental, job application, etc.) is legitimate. This makes it much more difficult for a fraudster to use your identity to open new lines of credit in your name. On the other hand, it can also delay the approval process when you apply for credit or a job.

What a fraud alert DOESN’T do. Although a fraud alert can stop someone from opening new lines of credit in your name, it does not protect you from fraud related to existing accounts. For example, a fraud alert makes it harder for thieves to open a fraudulent credit card, but would not stop them from making fraudulent charges on an existing credit card if that account information were compromised. This is why it is important to continue to diligently monitor your accounts even after you enact a fraud alert.

Only one fraud alert request is required. When you set up one of these alerts with any one of the three major credit reporting companies (Equifax, Experian or Transunion), that company will automatically inform the other two to add an alert; you do not need to contact each of the three companies separately.

Cost: Fraud alerts are free.

Types of fraud alerts. There are three types of fraud alerts:

  1. Initial fraud alert:
    A 90-day alert that is available to anyone who requests it. You can request an alert every 90 days to keep your fraud alert active indefinitely, or you can pay for credit fraud monitoring services that will renew the request for you every 90 days as part of their services. Please note that many of the free credit monitoring packages offered by companies who have experienced a data breach include a fraud alert. If you were a part of a recent breach at Target, Home Depot, Anthem or other companies and have opted into the credit monitoring service they offered for their customers, you may already be protected by a fraud alert.  
  2. Extended fraud alert:
    A seven-year alert available only to people who have been victims of identity theft. Documentation of an identity theft report is required. If you request an extended fraud alert, you will not receive any prescreened credit offers for the first five years of the alert period.
  3. Active duty military fraud alert:
    A one-year alert available only to active duty military personnel. If you request an active duty military fraud alert, you will not receive any prescreened credit offers for two years.

Credit freezes

What a credit freeze does. A credit freeze (aka security freeze), lets you restrict access to your credit report. This makes it less likely that identity thieves could open new accounts in your name. Because most creditors want to see your credit report before they approve a new account, keeping them from accessing your account may stop them from extending credit if a fraudster applies for it using your information. When you want to allow someone to access your credit report – when you apply for a loan or job, for example – you can contact the credit reporting companies to temporarily lift the freeze and allow access to your credit report.

What a credit freeze DOESN’T do. A credit freeze does not stop a thief from using a stolen credit or debit card number, so you still need to monitor your accounts just like you did before you set up your credit freeze.

Three requests are required. Because credit freezes are so much more limiting than fraud alerts, you can’t enact credit freezes with a single request to one of the credit reporting companies. Instead, you need to file a request at each of the big-three credit reporting companies: Equifax, Experian and Transunion. If you file a credit freeze request with only one credit reporting company, any fraudster who applies with a creditor who uses the others may still be able to open credit, so it is crucial that you request a credit freeze with all three companies if you choose this option.

Cost varies:

  • The cost to institute a credit freeze – and to lift it when needed – varies by state. They are often free for those who have already been a victim of identity theft, but can cost as much as $10 for those who are not victims, but choose to freeze their credit as a preventative measure. In some states, fees are discounted for senior citizens, minors or other groups. Transunion provides a state-by-state listing of costs for victims and non-victims, so if you want to know what cost you might incur, if any, that’s a good place to start your research.
  • Keep in mind that for a credit freeze to be effective, you need to file three times – once with each of the three reporting companies – so you will end up paying the fee stipulated by your state’s laws three times.
  • In some states in which fees for lifting a credit freeze can be charged, you can reduce the fees you pay if you ask the potential creditor, landlord or employer which credit reporting company they use, then lift the freeze only with that single company.
      

Identity theft resources

Federal Trade Commission

Equifax

Experian

Transunion