credit

2 ways to stop identity theft

Consumers concerned about identity theft have good reason to worry. According Javelin Strategy & Research, in 2012 alone, 12.6 million adults were victims of identity fraud.

Identity theft can take many forms, but one type of fraud occurs when an unauthorized credit account is opened.

Two major tools -- fraud alerts and security freezes -- can help consumers fight back against such an action, says Tod Burke, a criminal justice professor and associate dean at Radford University in Radford, Va.

Alerts, freezes fight ID theft

You can fight back against identity theft by using fraud alerts and security freezes. If you're worried you may be a victim of credit fraud, contact the three major credit reporting agencies: TransUnion, Experian and Equifax.

"We're not going to always prevent identity theft, but alerts and freezes can help minimize the chance of it happening," Burke says.

A fraud alert is a notation placed on a person's credit report that requires potential creditors to verify a borrower's identity before any new credit is issued in his or her name.

In comparison, a security freeze, also called a credit freeze, prevents potential creditors from viewing a credit report at all. This means no one -- not even you -- can open a new line of credit in your name unless the freeze is lifted.

Consumers can use one or both tools to help protect their credit, Burke says. Following are descriptions of how these options compare in five different areas.

1. Fees

It costs money to initiate a security freeze with each of the three major credit bureaus, up to a total of about $30, says Mari Frank, author of the book, "The Complete Idiot's Guide to Recovering from Identity Theft."

Frank says the exact cost depends on a borrower's state of residence, whether the borrower is a senior citizen, and whether he or she already is a victim of identity theft.

On the other hand, fraud alerts don't cost anything. In addition, consumers who put an alert on their records are allowed to get a free copy of their credit report with each of the three major credit bureaus, Frank says.

Consumers initiate security freezes by contacting all three credit reporting agencies, TransUnion, Equifax and Experian. But for fraud alerts, once you place a fraud alert on your credit report with any one of the three major credit reporting companies, that company will notify the other two and fraud alerts will also be placed on those files, too. Requests can be made via the agencies' websites, by telephone or by mail.

"I would recommend making any request to the bureaus in writing," Burke says. "It may add a few days to the process to mail it in, but it's a good idea to have written correspondence for your own personal records."

2. Strength of protection

Fraud alerts tell potential lenders to verify a person's identity before issuing new credit. However, there are no specific rules for doing this verification, and many consumer advocates are concerned that potential creditors don't do enough to confirm a borrower, Frank says.

"It's frustrating to have an alert if it has no teeth," she says.

By contrast, security freezes don't allow new creditors to look at a file at all.

"It puts a lock on your credit," Frank says.

advertisement

Show Bankrate's community sharing policy
          Connect with us
Product Rate Change Last week
Balance Transfer Cards 15.71%  0.02 15.69%
Cash Back Cards 16.41%  0.01 16.40%
Low Interest Cards 10.86% --0.00 10.86%
 
Search
advertisement
CARDS WEEKLY NEWSLETTER
Credit cards on a table

Get advice for managing credit cards, building your credit history and improving your credit score. Delivered weekly.

advertisement

Credit Card Blog

Jeanine Skowronski

CFPB: Lender distorted credit reports

The Consumer Financial Protection Bureau has an eye on credit reporting issues. The agency took enforcement action against auto financer First Investors Financial Services Group Inc. Wednesday for distorting consumer credit records for years. Per the CFPB, First Investors, which lends primarily to subprime borrowers, failed to fix known flaws in a computer system that  ... Read more

Partner Center
advertisement

Connect with us