Credit Freeze: What Should You Do?

Credit Freeze vs. Fraud Alert: What Should You Do?

If you’ve followed the news since the Equifax data breach, you’ve heard loads of advice on how to protect yourself from identity theft: credit freezes, fraud alerts, and even talk of changing your Social Security number. So, which is better: credit freezes or fraud alerts? We’ve done the research, so you can make an informed decision.

Setting a Credit Freeze

A credit freeze locks down your credit report at one of the four credit bureaus (Equifax, Experian, TransUnion, or Innovis) so that it can only be viewed by companies you already do business with. Businesses won’t extend credit until they check your credit report, so a freeze prevents thieves from opening accounts using your name. Different businesses buy information from different credit bureaus, so you need to set up credit freezes at all four.

To place a credit freeze, call or visit the credit bureau website, submit your name, address, date of birth, and Social Security number (SSN), then pay a fee, which will vary by bureau and by state. Once your freeze request is processed, the credit bureau sends you a confirmation letter with a unique PIN number or password that you can use to access your credit report. If you ever need to unfreeze your account to apply for credit, you’ll enter your PIN number and pay another fee.  A credit freeze does not prevent you from changing credit limits on your existing accounts. In fact, it doesn’t affect existing credit relationships in any way. Credit freezes remain in effect until you cancel them unless you live in Kentucky, Nebraska, Pennsylvania or South Dakota, where they expire after 7 years.

Setting a Fraud Alert

A fraud alert requires any potential creditor to take extra steps to confirm an applicant’s identity before extending credit. This can halt identity thieves, and if you’re contacted about an application you didn’t make, you’ll know something fishy is going on. Under the Fair Credit Reporting Act (FCRA), you can place a fraud alert for free by contacting any one of the three major credit bureaus and providing proof of your identity. Whichever bureau you contact is required to notify the other two to place an alert on your file. An initial alert only lasts 90 days, but you can renew as many times as you like. If you do become a victim of identity theft, you can file a police report, and then you are entitled to set up a free 7-year fraud alert.

What to Do?

Both credit freezes and fraud alerts are good tools to protect yourself from identity theft. If you don’t plan to apply for credit anytime soon and you don’t mind the fees, set credit freezes at all the bureaus. Just keep good track of your PIN numbers in case you need to thaw your reports in future. If you plan to apply for credit, setting a fraud alert is a good alternative. It’s free, convenient, and can slow down thieves enough that they’ll give up. And some experts expect that Equifax breach victims will be allowed to set 7-year alerts without proof of identity theft.

Regardless which option you choose, know that neither credit freezes or fraud alerts provide absolute protection. As Consumer Reports recently pointed out, the Equifax breach exposed enough data for thieves to steal your tax return, tap your Medicare/Medicaid benefits, or create a bogus driver’s license in your name. So, in addition to whatever preventive measures you take, be sure to also take steps to help yourself recover if identity theft happens to you.