What's the Difference Between Fraud Alert and Credit Freeze?

The pandemic has had a devastating impact on the lives of millions of Americans. Many people have lost loved ones, jobs, and their sense of freedom. The pandemic has also driven a rise in fraudulent activity as scammers and identity thieves have used this unfortunate circumstance to pounce on the public’s fears and concerns during the health crisis. According to the Federal Trade Commission, there were 4.7 million fraud complaints filed in 2020, an increase of 45 percent compared to 2019. The most common categories for fraudulent activity were identity theft, imposter scams, and debt collection.

Identity thieves don’t discriminate. They don’t care who you are or what you do, and anyone can fall victim to their deceptive schemes. As fraudulent activities continue to rise, it is important to know how to protect yourself. There are two proactive steps you can take to lessen the threat of identity theft and help put your mind at ease - fraud alert and credit freeze.

Here’s a breakdown of the differences between fraud alerts and credit freeze.

Fraud Alerts

A fraud alert works great if you're looking to add an extra layer of security. It's a warning placed on your credit report that requires potential lenders to verify your identity before processing an application.

This means if someone attempts to open a new credit card or apply for a loan using your name, the lender has to take extra steps to verify your identity before opening an account. You'll need to authorize and verify your identity any time your credit report is being accessed.

There are three types of fraud alerts you can place on your credit report.

1. Initial Fraud Alert.

The initial fraud alert is used if you suspect that you may have become a victim of fraud or identity theft. This alert is free and is active on your credit report for one year.  

2. Extended Fraud Alert.

The extended fraud alert is the most common type of fraud alert. This alert can only apply to your credit report if you’re a victim of identity theft or fraud. The extended fraud alert is free, and it stays on your credit report for up to seven years.

To place an extended fraud alert on your credit report, you will have to file an identity theft report with the Federal Trade Commission or provide a police report of the crime.

3. Active-Duty Alert.

The active-duty alert is offered to active-duty service members to protect them during deployment. This alert is also free, and it remains active for one year. 

Once you place a fraud alert with any one of the credit reporting agencies, it will automatically apply to all three credit reporting agencies - (Equifax®, Experian™, TransUnion®).

Credit Freeze

A credit freeze takes an alert to the next level. It allows no one, including lenders, access to your credit report. Unlike the alerts, you will need to contact each credit reporting agency to place a freeze on your report. You can manage your credit freeze online or by phone. To manage your freeze online, you may be required to set a PIN or password to unfreeze your credit report. To manage your credit freeze by phone, you will be required to provide information to confirm your identity. 

Whenever you plan to apply for credit or any service that requires access to your credit report, you will have to remove the credit freeze and set the specific time period you want the freeze lifted from your report.  This service is free of charge. 

Which option is right for you?

Adding a fraud alert or credit freeze can depend on where you fall in these categories:

Are you a victim of fraud or identity theft? The right option for you will depend on how often you anticipate applying for credit or service that may require access to your report. If you plan to access it frequently, an alert may work for you. On the other hand, if you don't see yourself applying or needing your report accessed, a freeze may be best for you.

Are you a recent graduate or in the early stages of your career? You may be accessing your report more frequently for potential employers, apartments, mortgages, credit cards, and car loans. Freezing your credit report may be more of a hassle. In this case, an extended fraud alert may be more effective for you.

Are you established in your career or nearing retirement? You may not see yourself needing a new credit card or applying for loans, in which case a credit freeze may be the better option. Having a freeze on your report will provide you with peace of mind knowing no one can access your credit report.

Do you have minor children? Although children don't usually have credit, they can still be victims of identity theft. You may have added your child as a co-signer for a credit card to help them establish credit. Having their credit frozen is a way to be proactive and help secure their financial future.

Are you concerned that your personal information (credit card, social security number, passwords, or bank account) may have been compromised? If so, you can place an initial fraud alert on your credit report.

If you're concerned about identity theft, both an alert and a credit freeze are great options. Also, if you want to be extra cautious, you're able to have both at the same time. You should still monitor your credit report to ensure there's no unusual activity and check your statements for any unauthorized transactions. You can check your credit report at annualcreditreport.com.

To place a fraud alert or credit freeze, contact the credit reporting bureaus:

• Equifax.com/personal/credit-report-services or call at 800-685-111
• Experian.com/help or call at 888-397-3742
• Transunion.com/credit-help or call at 888-909-8872