More than ever, it’s important to monitor your own credit and take precautions in to prevent having your credit compromised or identity stolen. But if it does happen, it’s absolutely crucial that you are prepared to act, taking measures that will stop the thieves in their tracks or at least minimize the damage. There are two main steps you can take to do just that: fraud alerts and security freezes. Often misunderstood or confused, understanding what these two credit score and identity protection tools are, what they can do to help you, and when and how to activate them could make the difference between having a close scrape or some serious financial damage it takes years to recover from.
Fraud Alerts
A fraud alert acts like a flashing warning sign that’s placed on your credit, letting lenders and other merchants know that something is amiss. It gives the notice that something has been compromised in your credit, finances, or identity, and therefore they should make any changes or extend you credit only with extreme caution.
A fraud alert is free to place with any of the three main credit bureaus if a consumer feels he or she has been a victim. And the good news is that even if you only register the alert with Equifax, they will notify the other two. Once a fraud alert is enacted, lenders need to contact you via a phone number you provide in order to verifying any credit activity, therefore vetting any fraudulent requests.
It’s important to note that with a fraud alert, lenders and third parties can still view your credit file and they have access to grant credit as they see fit, they just have to jump through a few more hoops essentially to verify the correct person authorized the request. A fraud alert encompasses a request for new credit, an extension to an existing credit account, or adding an additional card to an existing account. Once you place a fraud alert on your credit report, you can request a free copy of your most recent credit report form each of the three consumer reporting companies in order to verify that everything is in order, or what has been altered.
There are three types of fraud alerts, differentiated by how long they act. An Initial Fraud Alert lasts for 90 days only but may be renewed. A Military/Active Duty Alert is for servicemen or women and will remain on their accounts for 12 months, also removing their name from pre-screened offers of credit for 2 years. And an Extended Fraud Alert is more intensive, requiring an Identity Theft Report with the police, and lasts for 7 years.
Security Freezes
If fraud alerts are flashing warning signs, then think of security freezes as roadblocks. Once a security freeze is placed on a consumer’s credit, lenders and any third party won’t be able to access their credit information or account at all. Even the consumer will have to follow special protocols if they’d like to apply for new credit or make changes. No new credit will be extended but unlike a fraud alert, you will need to file a security freeze with each credit bureau individually.
Instead of 90 days, 12 months, or 7 years, a security freeze will stay in place until the consumer removes it. They also can lift the freeze temporarily if they wish to apply for new credit or make specific changes as a one-time thing, using a secret code or special pin number.
The majority of states will allow a consumer to place a security freeze on their credit account for free, or a reduced fee. A security freeze isn’t perfect or all-encompassing, but it does take much deeper measures to protect a consumer who’s been the victim of identity theft and is looking to protect themselves. With a security freeze in place, certain creditors will still be able to access your credit information. Companies you already do business with: your mortgage holder, credit cards, student or auto loans, phone company, etc. still will have access. A security freeze also will not block the prescreened offers you receive in the mail for new credit, so it’s important to still monitor your accounts and stay diligent.
