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Identity theft has given plenty of consumers reason for concern. More than 13 million adults in the United States were victims of identity fraud in 2015, according to Javelin Strategy & Research. The total fraud amount was $15 billion.
Identity theft can take many forms, but one type of fraud occurs when an unauthorized credit account is opened.
A pair of 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, Virginia.
Prevent ID theft with a:
- Ask one of the 3 credit reporting companies to put a fraud alert on your credit report.
- It requires potential creditors to verify your identity before any new credit is issued in your name.
- Lasts 90 days, and you can renew it.
Security freeze (aka credit freeze):
- Ask one of the 3 credit reporting companies to put a security freeze on your credit report.
- This keeps potential creditors from seeing a credit report at all. (The government can still get access to it.)
- No one can open a new line of credit in your name until the freeze is lifted.
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 3 major credit reporting agencies:
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“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, although the government can still get access to it. This means no one — not even you — can open a new line of credit in your name unless the freeze is lifted.
Comparing alerts vs. freezes
- Makes lender verify identity
- Lasts 90 days with option to renew
- Difficult to reverse
- Has no effect on credit rating
- Costs up to $30 to initiate
- Locks credit
- Lasts indefinitely
- Easy to reverse
- Has no effect on credit rating
Consumers can use one or both tools to help protect their credit, Burke says. Following are descriptions of how these options compare in 5 different areas.
It costs money to initiate a security freeze with each of the 3 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.
- Whether he or she already is a victim of identity theft.
If you have been a victim of identity theft — and can prove it — you can freeze your credit for free.
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 3 major credit bureaus, Frank says.
Consumers initiate security freezes by contacting all 3 credit reporting agencies. But for fraud alerts, once you place a fraud alert on your credit report with any one of the 3 major credit reporting companies, that company will notify the other 2 and fraud alerts will also be placed on those files. 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.”
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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.
While this option offers more protection, Frank admits a freeze can be a hassle for people who plan to legitimately apply for credit, or who need an insurance company, landlord or potential employer to check their credit history.
“A freeze may work best for someone who’s not planning on applying for new credit in the near future, she says.
3. Time length
Fraud alerts typically last for 90 days and can be renewed for additional 90-day periods.
“Existing victims of identity theft can have the alert extended to 7 years,” Frank says.
Meanwhile, a security freeze lasts indefinitely.
4. Ability to be reversed
Permanently “thawing” a security freeze can be an involved process, Burke says. Consumers must contact each of the 3 bureaus to request an end to the freeze. They must also pay a fee of about $5 to $10 and provide personal information, like their date of birth, address and Social Security number. After receiving a freeze request, the consumer gets a confirmation letter and a personal identification number, or PIN, from each credit reporting agency.
“If you forget your PIN, the freeze reversal could be delayed for several days,” Burke says.
The process for ending a fraud alert is easier, he says.
“Fraud alerts can be ended by contacting each of the 3 major credit reporting agencies, and by requesting that they be removed,” Burke says.
Consumers can also choose to wait until the alert expires.
5. Effect on the consumer’s credit score
Neither a fraud alert nor a credit freeze alone will affect a consumer’s credit rating, Frank says.
Incidentally, although new lenders can’t access credit files when a security freeze is in place, existing creditors can still view those records and continue to see how well consumers are managing their accounts, she says.
Some experts say that for the most identity theft protection, consumers should look beyond fraud alerts and credit freezes.
Monitoring plans are offered by independent companies, financial companies and even credit bureaus themselves. Costs vary, but are typically around $10 per month.
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