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A fraud alert on your credit reports requires creditors to verify your identity before processing credit applications, while a credit freeze blocks access to your credit report altogether. Both measures are designed to prevent identity thieves from opening loans or credit accounts in your name.
Fraud alerts and credit freezes have advantages and limitations. Here's a rundown on each.
What Is a Fraud Alert?
The type of fraud alert most often discussed as an alternative to a credit freeze is an extended fraud alert, or fraud victim statement. Intended for victims of credit fraud or identity theft, an extended fraud alert will stay on your credit report for seven years unless you have it removed sooner. When adding one to your credit report, you must provide a copy of a police report or other valid identity theft report submitted to law enforcement.
An extended fraud alert attaches a notice to your credit report that indicates you are a fraud victim. It asks any business seeking your credit report to contact you to confirm your identity before granting credit in your name. These could include:
- Credit issuers
- Potential employers
- Car insurance companies
- Car rental agencies
Anyone can place a less stringent type of fraud alert known as a temporary fraud alert, or initial security alert, on their credit report at any time and for any reason (no criminal report is required). It notifies businesses requesting your credit report that you are a potential victim of identity theft and asks them to confirm your identity. A temporary fraud alert stays on your credit report for one year unless you cancel it sooner.
A third type of alert, the active-duty fraud alert, is functionally identical to a temporary fraud alert, but is designed for service members on remote-duty assignments. Proof of military orders must be submitted along with a request for this type of alert.
How to Set Up a Fraud Alert
It's free to set up fraud alert at all three national credit reporting agencies, Experian, TransUnion and Equifax. When you request a fraud alert at one credit bureau, fraud alerts are automatically added at the other two bureaus. You can have a fraud alert removed at any time, but you must contact each credit bureau separately to do so. When you do, you will need to submit proof of identity, just as you did when you set up the alert, to prevent identity thieves from impersonating you and removing a fraud alert from your credit report.
Fraud alerts are a great option if you want to be cautious, but know you'll need to authorize access to your credit reports when it needs to be accessed. Still, it's usually more convenient than cutting off access to your credit reports altogether with a credit freeze.
What Is a Credit Freeze?
A credit freeze, or security freeze, is a more severe measure for protecting your credit file. Unlike a fraud alert, a security freeze prohibits potential new creditors (and others permitted by law to view your credit files or obtain your credit scores) from accessing your credit history unless you first lift the freeze.
There's not much reason to put both a credit freeze and a fraud alert in place, but if you did, no one would ever see the fraud alert until you removed the credit freeze. Access to your credit file is required for the fraud alert to be visible.
How to Freeze Your Credit
Find out how to freeze your (Experian, Equifax, TransUnion) credit reports. In order to freeze each credit report, you must submit requests to each of the three credit bureaus individually. Procedures vary somewhat at each, but they are essentially similar to those used at the Experian Security Freeze Center to start a credit freeze. As part of the freeze request, which can be made online or by phone, you will be assigned (or asked to create) a PIN code or password for use in unfreezing your credit file.
When you provide a PIN or use a password to request removal of a credit freeze online or by phone, your credit file will be unfrozen, or "thawed," within one hour. If you lose your PIN or forget your password, thawing is still possible, but it may take longer and require resubmission of proof of identity.
When to Unfreeze Your Credit
You must unfreeze your credit file before applying for credit or other services that require access to your credit history, such as opening a new cellphone account or applying to renting an apartment. If you do not temporarily unfreeze your credit file before filing an application, the business will not be able to access your credit file or process your application.
If you have one or more credit applications pending, or if you plan to apply for new credit in the near future, consider postponing a security freeze. For lenders to process your credit application, you will need to unfreeze your credit report, either permanently or for a designated time period.
If you know which credit bureau or bureaus a lender will be using to check your credit, you can request from them a single-use PIN you'll provide to the lender to grant one-time access to your credit report. If you're shopping for the best lending terms you can get (as you always should when applying for loans or credit cards), it's virtually impossible to know which bureaus all your lenders will use, so the one-time PIN option isn't very practical. In that case, you're better off lifting your credit freezes at all three credit bureaus for a set time period—until at least two weeks after you send out your last application.
Which Option Is Right for Me?
Deciding whether to set up a fraud alert or credit freeze depends on your situation:
- If you're a victim of credit fraud or identity theft, deciding between an extended fraud alert and a credit freeze is mainly a matter of how often you anticipate needing to authorize access to your credit files in the months and years ahead.
- If you're early in your career and foresee applying for credit—including car loans, mortgages or credit cards—in the next few years (or seeking an apartment rental, rental cars, or new utility or cellphone accounts), freezing your credit files may prove unwieldy. You may even find yourself lifting the freezes so often that they are practically ineffective. An extended fraud alert will likely be more useful for you.
- If you're late in your career or in retirement, and don't anticipate needing any new credit cards or loans, credit freezes can provide peace of mind in the knowledge that no one can touch your credit files. Keep in mind that you may need to thaw your credit files occasionally for non-lenders who conduct credit checks, such as cellphone, cable or internet providers.
- If your minor children have credit files, freezing those credit files on their behalf is a good precaution. Underage children do not ordinarily have credit files, but will if you've made a minor a cosigner on a credit card (a good strategy for helping them get a heads-tart on building a credit history), or if your children have credit files as a result of identity theft. You can thaw the files when the children come of age and are ready to begin seeking credit on their own.
- If you're concerned your personal information may have been compromised but haven't seen evidence of a crime you can report to law enforcement, consider a temporary fraud alert. If you're worried that your personal information—credit card and bank account numbers, account passwords or Social Security number—may have been exposed to scammers or in a security breach, you can add a fraud alert to all your files with one quick request to any credit bureau. You can remove it anytime you like, renew it easily every year if you prefer or, if there's no indication of any criminal meddling after a year, just let it expire and return your credit files to normal accessibility.
Fraud alerts and credit freezes are valuable tools for combating identity theft and credit fraud. It's good to familiarize yourself with both and be ready to use them whenever they meet your needs.