As an expert who has helped many clients recover from identity theft, I know firsthand how damaging it can be when criminals get access to your personal information. Fraudsters can easily open credit cards or loans in your name, racking up debt that destroys your credit and takes ages to resolve.
So how can you keep the fraudsters at bay? I recommend taking a proactive approach with fraud alerts and credit freezes. These two tools can form a protective barrier around your credit by alerting lenders and completely freezing access to your credit reports.
In this article, I’ll explain how each option works so you can decide if a fraud alert, credit freeze, or both is the best fit for your situation.
What is a Fraud Alert Exactly?
When you place a fraud alert on your credit file, you’re telling lenders to take extra precautions before approving any new credit applications in your name. I like to think of it as a warning flag that prompts creditors to double and triple-check that they are dealing directly with you, not an identity thief.
There are three types of alerts to choose from:
- Initial Fraud Alert: Pops up for one year on your credit file and requires creditors to verify your identity before issuing credit. It’s renewable after the year is up. I recommend this if your personal information was potentially compromised.
- Extended Fraud Alert: This lasts for seven long years and forces creditors to contact you personally before approving any applications. This is ideal for identity theft victims with police reports.
- Active Duty Military Alert: Stays on your file during deployment and stops lenders from issuing pre-approved offers. It’s specifically for service members on active duty.
The main advantages of fraud alerts are that they are completely free, don’t hurt your credit score, and force lenders to take identity verification steps. Just contacting one credit bureau will prompt them to notify the other two bureaus to add the alerts.
How Does a Credit Freeze Work?
Freezing your credit locks down your credit reports like an ice block, preventing access to potential thieves. As I like to explain, no one can view your reports or open new accounts when your reports are “frozen solid” without explicit approval from you by temporarily lifting the freeze.
Here are some key advantages of credit freezes:
- It locks down your reports at all three bureaus, preventing new account fraud.
- You must authorize access, even for legitimate applications, via a temporary lift of the freeze.
- Free to place and lift temporarily when you need credit access.
- Your current accounts and credit score are not impacted.
The main downside is that you must contact each bureau separately to freeze and unfreeze your reports. However many experts, myself included, recommend credit freezes as the best preventative measure against new account identity theft.
Should You Use a Fraud Alert or Credit Freeze?
When clients ask me if they should use a fraud alert or credit freeze, I recommend looking at your unique situation. Here are a few examples of when each option may be more suitable:
Fraud Alert Use Cases:
- If your wallet was stolen and you’re concerned about identity theft risk.
- After a data breach where your information was exposed.
- If you notice suspicious activity on your existing credit accounts.
- When deployed on military service and want to minimize risk.
Credit Freeze Use Cases:
- If you’ve already been victimized by identity theft with accounts opened in your name.
- To proactively block any new credit accounts from being opened by thieves.
- If you don’t plan to apply for new credit yourself anytime soon.
- As an everyday identity theft prevention tool even if you haven’t been targeted yet.
For many people, using both fraud alerts and a credit freeze together provides the most complete protection. The freeze blocks new accounts while fraud alerts put lenders on high alert for identity verification on your existing accounts.
Take Control of Your Credit Security
In the end, the most important thing is taking proactive steps to secure your credit and personal information. Evaluate your risk factors and needs to decide if fraud alerts, credit freezes, or both together provide the right layer of protection. Don’t wait until after identity theft has struck to take action. With a few free tools, you can build a barrier to keep the fraudsters at bay.