Credit Freeze vs. Fraud Alert

Understanding the tools available to protect your credit and your identity is essential. The world is more connected than ever, and people are using online platforms to pay bills, shop, find entertainment, and access bank accounts. While this flexibility is convenient, it also presents potential risks. One website with insufficient security protocols or a spoofed link (a non-official website disguising itself as a legitimate website) can easily compromise your personal and financial information. While following recommended security practices, such as using up-to-date antivirus software, verifying uniform resource locators (URLs) before clicking on links, and employing a virtual private network (VPN) can all help mitigate risks, some hazards are beyond your control. For example, recent large-scale data breaches have resulted in substantial consumer information being leaked. In these cases, it was not the consumer’s actions that caused the compromise; rather, the breaches resulted from the company’s insufficient security protocols. However, once a breach occurs or you suspect your information may be compromised, you can take steps to protect yourself, such as initiating a credit freeze or fraud alert.

What is a fraud alert?

A fraud alert is initiated by contacting one of the three major credit bureaus – TransUnion, Experian, or Equifax – to report that you suspect you are the victim of fraud. Once this is done, the credit bureau you contact will notify the other bureaus of the fraud alert, and they will each place a fraud alert on your account. If you want to expedite the process, you can place a fraud alert at all three bureaus. However, it is not necessary to do so. Once the fraud alert is placed, lenders must take extra steps to verify your identity before opening a new account. For example, when applying for a new credit card, the provider may request that you submit a scan of your driver’s license or other government identification card. Consequently, a fraud alert will ensure creditors take extra precautions, making it more difficult for anyone to falsify your identity to open an account.

What is a credit freeze?

While a fraud alert is a great tool to protect yourself, initiating a credit freeze is the strongest action you can take to protect your credit. When a credit freeze is initiated, no new credit accounts can be opened until the freeze is lifted. Unlike a fraud alert, which you can initiate with one bureau, and that bureau will then notify the other bureaus to initiate fraud alerts, a credit freeze must be initiated individually with each bureau. To do so, simply create a free account with each credit bureau, and initiate the freeze. While a credit freeze can also be initiated by calling the credit bureaus, making an account is preferable because you will have greater control when you need to lift the freeze. If you are opening a new credit account, you will have to lift the freeze before applying for the credit. Otherwise, the request will be rejected. Lifting a freeze without an online account will typically require you to mail documents to the bureau before the change takes place. Therefore, having an account that provides the ability to control the freeze yourself will reduce the time and effort required to lift the credit freeze. As always, ensure all your credit bureau accounts have strong and unique passwords.

When should I use a credit freeze or fraud alert?

If you simply lose a credit card or enter your credit card information on an illegitimate website, a credit freeze or fraud alert is not typically necessary. In these instances, you can call your credit card provider to cancel the card and send you a new card with a different account number, expiration, and security code. If a fraudulent charge was processed, report it as such. The transaction will be flagged and an investigation initiated by the credit card provider. The enhanced fraud protection associated with credit cards is one of the significant advantages they have over debit cards.

Although the compromise of a credit card account alone does not require a credit freeze or fraud alert, any time your social security number is compromised or involved in a questionable transaction, you will want to initiate a credit freeze or fraud alert. Whether you suspect a compromise based on unusual activity on your credit report or you unintentionally provided information to an illegitimate business/person, such as a phishing attempt, it is best to err on the side of caution rather than take unnecessary risks. While there are times when you know your information has been compromised, at other times you may be completely unaware. The best security practice is to keep a credit freeze in place (even if you do not suspect a compromise) and only lift it when necessary.

How do I monitor my credit to ensure I am protected?

One of the best free tools to monitor your credit is the credit report. You can request a free credit report from each of the credit bureaus by going to https://www.annualcreditreport.com/. Do not go to any other website to pull your credit report. If you want to verify the website is the correct one, simply go to the Federal Trade Commission’s website to verify the link. When you access your credit report, start by reviewing your personal information, such as name, past addresses, and contact information. Next, review the open credit accounts. Ensure all the accounts are correct and the payment history is accurate. If there is an account you do not recognize, you should submit a dispute for the account and initiate a credit freeze.

In addition to pulling your credit report, there are also numerous credit monitoring services available that will notify you of any suspicious activity or when your social security number, phone number, or other personal information is found on a website or used to open an account. Check with your current credit card provider to see if they offer complimentary credit monitoring; many credit cards provide this service at no charge. If not, you can decide whether the monthly subscription for such services is worth the cost. Regularly reviewing your credit report and utilizing practices to protect your identity, such as strong passwords, shredding important documents, and verifying URLs/phone calls may make an additional credit monitoring service unnecessary.

Conclusion

Protecting your credit and your identity is necessary to ensure your financial security. While basic protection measures, such as practicing strong passwords, not clicking on unknown links or attachments, and validating the source requesting information before providing any, will go a long way in protecting your credit, there are some factors that cannot be anticipated. In such instances, knowing how to respond when your credit is compromised is essential. Fraud alerts notify creditors to take extra precautions before opening a new line of credit. Credit freezes inform creditors not to open new lines of credit unless the freeze is lifted. While a credit freeze takes more effort to initiate and remove, it is the ultimate way to ensure your identity is not associated with a new account unless you request it. Keeping a close watch on your credit report will help you determine which type of precaution to take.