Fraud Alert vs. Credit Freeze: What’s the Difference?

In April of 2018, Facebook announced a data breach that affected close to 90 million users — that’s more than a quarter of the population of the US. The Facebook breach is just one of many recent large-scale breaches recorded. According to an Accenture study in 2017, the number of large-scale, targeted data breaches is growing by almost 30 percent per year.

With the number of potential ways your credit information could have been compromised to date, it is imperative to find strategies to protect yourself. While sophisticated hackers can access pretty much any information with enough effort, that doesn’t mean we should make it easy for criminals to steal your identity. Cyber crime experts like to use a metaphor with home security: just because they could break your door down, the adage goes, doesn’t mean you shouldn’t lock your doors.

So what should you do if you suspect a breach or have seen a hint of fraudulent activity on your account? One way to lock your credit security door more tightly is by wisely using fraud alerts and credit freezes to protect yourself from identity theft.

What is a Fraud Alert?

what is a fraud alert?

A fraud alert is a temporary alarm system, set up on your credit account that will inform you if there are any changes in your account. The alert system means that if you (or anyone with your credentials) attempts to obtain new credit, the business must contact you to verify your identity before moving ahead. It is an added step, but not a particularly onerous one for anyone who wants to apply a layer of security.

Setting one up is free and you can contact any of the three major credit agencies (Experian, Equifax, TransUnion) to get an alert applied to your account.

If you set an alert up for any of these agencies, they automatically contact the other two to give you comprehensive fraud alert coverage. A fraud alert typically lasts 90 days and can be renewed if necessary. These can be used preemptively, but should be employed at the first sign of a breach of your identity. If you think a large-scale breach may have affected you — this is good defense. If you wish, it is also possible to renew your alert for additional 90 day spans.

Extended Fraud Alert

If you have been the victim of identity theft you have the option of setting up an extended alert that lasts up to seven years. In order to get an extended alert issued you will need an identity theft report and proof of your identity. The alert may be removed at any time, though it requires a written request to do so.

As a bonus, an extended fraud alert means that you will not receive credit and insurance offers for five years. However, neither an initial fraud alert or extended fraud alert can guarantee that you will be entirely safe from accounts being opened in your name as there are many kinds of accounts that do not require a credit check, such as utilities, cable and cellular service. So it is best to remain vigilant about checking your credit.

What is a Credit Freeze?

what is a credit freeze?

A credit freeze is a freeze placed on your credit file that blocks lenders from viewing your report without authorization. This option means that without your explicit consent (given with a Personal Identification Number [PIN]), no business can pull your credit information to even begin the process of offering credit or opening an account. This is a better line of defense against fraud, however is a little more cumbersome for the consumer.

There are fees associated with the application (and removal) of the freeze that vary by state. These are usually around $10 per agency and you must contact all three of the major agencies separately to put together a comprehensive freeze.

If you are involved in any credit changes yourself, like getting a car or mortgage, or looking for another line of credit, the freeze is likely not for you. It is very useful, however, for those who are happy with the amount of credit they have currently to entertain. The credit freeze is a particularly good protection vehicle for older people, who are often targets of phishing scams or other cyber crime.

Unfreezing Your Credit Report

To initiate an unfreezing of your account you will need the PIN number that was given to you by the specific agencies you contacted as well as a written statement. Temporary unfreezing and reinstatement of a freeze are possible for a specific credit union. if, for example, you do need to purchase a car, you can unfreeze a desired credit union account for just that transaction. However, make sure you leave ample time to get your business done. Credit agencies have up to three days to comply with an unfreeze and this can delay and inhibit your transactions.

Double Protection

It is possible to employ both credit freezes and fraud alerts as a combined security strategy. This might be useful if you are employing one particular credit agency more often and don’t want to deal with the barriers of a freeze for one, but still want to protect yourself more thoroughly in general. It is also possible to put a fraud alert on a credit freeze, just in case you would like to be notified if anyone tries to access your frozen account.

Cyber crime is a growing issue and you cannot be too careful with your credit. Being proactive is a good idea when it comes to protecting yourself from fraud. There’s no reason not to employ at least a fraud alert on a regular basis and if you feel at any moment that your data has been compromised, employing a freeze will be a better level of protection.