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Recently, identity theft has been a common occurrence in the news. It includes the Equifax breach, hacked Yahoo accounts, and the Office of Personnel Management’s (OPM) hacked personnel records and exposed security clearances. As a consumer, how can you stay protected?
How can you ramp up your protection?
You have two main options when it comes to protecting yourselves against potential fraud in the future. You can either set up a fraud alert or a credit freeze through the credit bureaus. Both these options make it more difficult in the future for someone to open up accounts in your name.
What’s the difference? Let’s explore.
Fraud Alert
When you place a fraud alert on your account, your credit report will indicate that you are a victim of identity theft. If someone tries to open up a new account in your name, the entity must verify the consumer’s identity before they can extend new credit. That usually means that they take extra security measures. According to the FTC, “With a fraud alert, a business must try to verify a consumer’s identity before extending new credit. Usually that means calling to check if the person is actually at the particular store attempting to get credit.”
Duration
Fraud alerts usually last 90 days. However, victims of identity theft have the ability to request an extended fraud alert on their credit report. This extension remains for seven years. In order to receive the extended fraud alert, you must provide a police report or another official record proving identity theft.
Setting up a fraud alert is really easy. You will need to visit one of the three major credit bureaus TransUnion, Experian and/or Equifax and then fill out the fraud alert form. Once you have completed the form, you will only need to notify one of the credit bureaus, as they will alert the other two credit bureaus. Placing a fraud alert is always free.
Free Credit Reports
Every time you place a fraud alert on your account, you are entitled to an extra free credit report from each one of the credit bureaus, in addition to the free credit report you receive yearly.
In theory, that means if you extend your fraud alert every 90 days, you can potentially receive a quarterly credit report from each credit bureau, plus your yearly credit report. You could receive up to 15 credit reports per year.
Credit Freeze
A credit freeze is exactly what it sounds like. It freezes your credit and stops a lender from accessing your credit report. This is an excellent solution if you seek to avoid fraudulent activity. However, that also means that if you want to open any new credit accounts, you would need to lift the freeze in order to allow new lenders to access your credit report.
As you can see, a credit freeze is a much stronger level of protection than a fraud alert.
When you place a credit freeze on your account, you will receive a PIN number. You would use this number each time you want to freeze, unfreeze, or refreeze your account.
Lifting a Credit Freeze
The downside to a credit freeze is that it also means that you can’t view your own credit report. In that case, you wouldn’t be able to catch any errors or signs of potential identity theft. You would also need to lift your credit freeze temporarily each time that you would like to open a new account.
Lifting a credit freeze can take anywhere between 15 minutes to 3 days, depending on the state. So, plan to accordingly in case you need to lift it in the future.
Cost
Depending on which state you live in, credit freezes may be completely free. This TransUnion link will let you know if the credit freeze is free or if there are corresponding fees in each state. If your state does not offer free credit freeze protection, typically the fees range between $2 – $12. Some factors that might waive the fee include if you have been a victim of identify theft or if you are over the age of 65.
Duration
Credit freezes typically last until you choose to lift them. However, there are currently three states, Kentucky, Pennsylvania, and South Dakota, that have seven-year expirations.
Please note, in the wake of the Equifax breach, Equifax is waiving its own fees to freeze and unfreeze reports.
Which option makes most sense for you?
If you have not suffered a loss yet, or if you plan to open new accounts in the future, and you don’t live in a state that offers free credit freezes, it may make sense to add a fraud alert as to not negatively affect your ability to obtain a new account. Keep in mind, too, that if you are job-hunting, some companies also factor credit checks before offering you a position. Additionally, insurance companies factor in your credit report when determining your rates.
If you have suffered a loss due to identity theft, it may make sense to place a credit freeze to prevent any further damage. This will also give you the ability to assess your situation and time to address any damages that have occurred. Afterwards, you can always reassess if you would like to lift your credit freeze and set up a fraud alert.
Our accountant was hacked a couple years ago and someone tried to file a false return in our name. Since then we’ve had our credit locked. It’s prevented any major identity theft issues (well, “any” actually – not just major) and it hasn’t inconvenienced us at all. Of course we’re 100% debt-free so don’t have much need of credit inquiries.
Brad – MaximizeYourMoney.com recently posted…How To Plan Financially For Your Child’s College Education
Hahhaha…I definitely agree being 100% debt-free is incredibly nice. I have to admit that I was a bit lax when I first heard about the breach. I am definitely thinking planning to do the credit freeze.
Someone stole my wallet on the bus and I noticed it 2 seconds after the bus took off. I was worried because unlike dropping it somewhere, this person could have been master ID criminals. I put a fraud alert out and haven’t heard any peep – hopefully that’s good?
Lily @ The Frugal Gene recently posted…4 Basic Investor Personality Types
My wife had her wallet stolen about three months ago. I even wrote a post on it. Ultimately we just went with the fraud alert and monitor her reports. Our state charges for freezes and we actively use our credit for travel hacking. My biggest concern would be to get a police report and a new license from the DMV. You don’t want someone to commit a crime and use your I’d when talking to the cops.
FullTimeFinance recently posted…An Air Bag Recall and A Free Rental Car
Oh man that would be awful if someone used your identity for a crime. I believe a Dallas Cowboy, Lucky Whitehead, had that happen to him. Even worse the Cowboys cut him even though he didn’t do anything wrong. He fortunately found another job with another team. But even so that’s horrible.
I’m so sorry to hear that!!! Hopefully the thief was after money and not your identity. Good thing you put up a fraud alert.
Do you know if this is also available in Canada? I had my purse stolen years ago and didn’t do either one. I do request a credit report on a regular basis but if it ever happened again I would definitely put a fraud alert on my account.
I had no idea that was the case. Thanks for sharing Caroline!!!
Thanks for the fraud alerts info. I was aware of the option to freeze but was unaware of the fraud alert details. Great info!
Wes recently posted…Our Patio Herb Garden
Glad you enjoyed it Wes!!! Like you I had to do a bit of research to fully comprehend everything.
Years ago I lost my wallet. In my wallet, I carried my social security number (social insurance number in Canada), so I was automatically enrolled in the fraud alert program. It was a bit of a hassle, but my credit was well protected.
If I have to choose one of the methods, I will choose the fraud alert method because it allows me the flexibility to check my report anytime I want.
Leo T. Ly @ isaved5k.com recently posted…The Easiest Way To Boost Your Retirement Savings By $100,000
Thanks for sharing Leo!!! The fraud alert definitely provides a lot more flexibility especially if you are planning to do some travel hacking 🙂
I’m paranoid about people stealing my ID, but at the same time, I feel like I haven’t taken all the needed steps to protect myself (i.e. password protection).
Mr. FAF once forgot his wallet in the bathroom at the Great Wall grocery store. It was gone by the time he went back 2 minutes later. We were so scared of identify theft which fortunately didn’t happen. >_<
Ms. Frugal Asian Finance recently posted…“If It’s Yellow, Let It Mellow” – Is It Worth It?
That’s the worst when you get things stolen. I don’t know why people do things like that. I’m surprised there hasn’t been more wallets with RFID chips in it to track the movement of wallets 🙂
Thanks for breaking down the difference between these to security measures. It is unfortunate that we have to deal with hackers and cyber criminals. I have opted for the credit freeze option. As you stated, it is more secure.
Dave recently posted…NFL Games: Fun, but Expensive
Thanks for sharing Dave!!! Credit freeze is definitely a great option especially if you don’t plan to open up anything up in the future 🙂
Alerts seem to be a little bit like closing the barn door after the cows get free. I like the idea of freezing all new accounts unless I authorize it. Since I don’t plan to add any new credit lines that shouldn’t take much work, either.
Jason@Simple Man Money recently posted…How To Get a Loan From Your 401(k)
Thanks for sharing Jason!!! Credit freeze is definitely the way to go if you don’t plan to open any accounts in the future!!!
I did not exactly know the difference. Thanks for posting. This was a nice follow up to your post earlier this week. Thanks again and have a great weekend. Tom
Tom @ Dividends Diversify recently posted…Rags To Riches
Thanks Tom!!! Glad it was so helpful!!!
I believe one my credit card offers fraud alerts or something similar for free. I had to buy some materials for a home project a few years back and I kid you not two minutes after I swiped my card I got a call from them making sure it was me that was using the card. Needless to say, I’m still with this CC company for their great customer service 🙂
SMM recently posted…Stock Market Is Great And I’m Nervous
Wow a call two minutes after you purchase something is amazing. Sounds like they have a customer for life 🙂
Thanks for the breakdown between the two. I have heard a lot about how to do a credit freeze the last couple of weeks due to the Equifax breach. I did not really know the procedure of how to put a fraud alert on your credit report. This is great info to know, appreciate you describing the differences MSM!!
Kris recently posted…Getting Ready for a Natural Disaster
Glad I could be helpful Kris!!!
Mr. G and I’ve had a credit freeze with each bureau for years. It’s free to freeze and temporarily unfreeze in NC. I’m a big fan.
A federal agent needed to do a background check on me since I’m the fiduciary for my aunt’s VA benefits. I asked him which bureau they use so I could unfreeze it. He laughed at me and said he was a fed, he could get the information. Ten minutes later he called back asking me to unfreeze. Also, FYI, we can check our own credit reports.
Thanks for sharing Mrs. Groovy!!! NC definitely has some nice laws on the books 🙂 Plus that’s too funny about the Fed, who knew 🙂