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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.
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.”
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.
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.
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.
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.