Fraud Alert vs. Credit Freeze

By: Carrie Kerskie, director of Hodges University Identity Fraud Institute

Often there is confusion between a fraud alert and a credit freeze. Many times, I hear people state they have “locked-down” their credit when all they have is a fraud alert. Here is the breakdown to help end confusion.

Fraud Alert
The most common recommendation when it comes to identity theft is to get a fraud alert. What exactly is a fraud alert? Federal law, the Fair and Accurate Credit Transactions Act of 2003 (FACTA), permits you to place a free 90-day fraud alert on your credit reports when you become a victim of identity theft. You call one bureau and they will notify the other two on your behalf. A fraud alert is a statement or disclaimer that is placed on your credit report. It is to notify potential creditors that you are a victim of identity theft and that there is an elevated risk of fraud. You have the option of including your telephone number so potential creditors will call you to verify credit applications.

Remember, a fraud alert lasts for only 90 days. Unless renewed, the alert is removed from your credit report on the 91st day. For those who are active military or are a documented victim of identity theft, there is the option to place a seven-year extension on the fraud alert.

While this sounds appealing, there are things to consider:

  1. A fraud alert is not 100 percent effective.
  2. Your credit report is still received by the requesting creditor.
  3. It expires after 90 days.

Security Freeze
The best way to prevent new account fraud, when someone applies for a new credit account in your name, is by initiating a security freeze. A security freeze prevents new creditors from viewing your credit report. A credit report tells the prospective creditor what kind of payer you are. When the creditor is unable to view your credit report, he/she is unable to determine if you would be a good client, thus, he/she will reject the application. To create a security freeze, contact each major credit bureau (Experian, Equifax and TransUnion) and ask for a security freeze, also known as a credit freeze. You can do this online or by mail. In Florida, the fee to initiate a security freeze is $10 per bureau. If you are over the age of 65 or a documented victim of identity theft, with a police report, the initial fee is waived.

You will be provided or asked to create a PIN number with each bureau. This will be used when you need to temporarily lift the freeze to permit a creditor to view your credit report; however, the credit bureaus may charge you a fee each time you lift and reinstate the freeze. Contact each credit bureau prior to the lift to inquire about any fees. The temporary lift can take two days to two weeks. Just make sure you let the creditor know in advance of your security freeze.

As stated before, the security freeze was designed to prevent new account fraud. It does not have any impact on using your current credit accounts. Further, it does not prevent any other type of identity theft. 

One final note, a credit freeze is primarily for individuals who will not be applying for new credit or needing to allow an organization to view his/her credit report. With a freeze, you do have the ability to temporarily lift the freeze to permit an organization to view your credit report. This could cause extra time and expense, typically $10 per credit bureau, to the process. 

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