Your personal information is valuable. If criminals get their hands on it, they can — among other things — open credit cards while pretending to be you. Then it’s up to you to shut down fraudulent accounts, dispute charges you didn’t authorize and clean up your credit report. That’s a huge hassle, and until you get everything resolved, your own ability to borrow could suffer.
So it’s worth it to take precautions to prevent identity theft. The tools you can use to stop scammers from borrowing money in your name include fraud alerts, which signal to businesses that they should verify your identity before approving a credit application, and credit freezes, which make your credit report off-limits to new creditors.
[Read: Best Credit Cards.]
What Is a Fraud Alert?
“A fraud alert for a consumer is sort of like a red flag,” says Chip Kohlweiler, senior vice president of security at Navy Federal Credit Union. Your credit report is still visible to any company that wants to view it, but the fraud alert warns creditors to take extra steps to confirm your identity.
Even though a fraud alert tells creditors to verify who you are, it doesn’t guarantee that businesses will vet applications carefully enough to stop scammers, says Florian Schaub, an associate professor of information at the University of Michigan, who studies privacy and security.
“It’s really up to their discretion whether they do additional checks and how thoroughly they check your identity,” he says.
Depending on your situation, you can set up one of three types of alert.
— Fraud alert. You can put a fraud alert on your credit report for one year if you suspect you’ve experienced identity fraud. When the year is over, you can renew the alert. A fraud alert on your file prompts lenders or other companies to check your identity before extending credit to you. And when you set up the alert, you’re entitled to a free copy of your credit report from each of the three major credit bureaus.
— Extended fraud alert. You can get this alert if you were the victim of identity theft and you’ve completed a police report or notified the Federal Trade Commission through IdentityTheft.gov. An extended fraud alert lasts seven years, and it prompts businesses to call you to verify any credit applications. Credit bureaus can’t send prescreened credit and insurance promotions your way for five years unless you opt in. You can request a free copy of your credit report from each of the three major credit bureaus twice in the year after you set up the alert.
— Active duty alert. If you’re a service member on active duty, you’re eligible for this alert. It initially lasts one year, and you can renew it to cover the rest of your deployment. This alert signals to businesses that they should ask for identification before extending credit to you, and it turns off unsolicited credit and insurance offers for two years unless you opt in.
It doesn’t cost any money to set up a fraud alert, and your credit score won’t be affected.
[READ: Best Credit Cards for No Credit.]
When Do You Need a Fraud Alert?
If you’re worried about fraud, but you don’t have evidence that anyone has stolen your identity, you might need a one-year fraud alert. For example, maybe you lost your wallet in an airport and found it again after an hour. Nothing appears to be stolen, but someone could have looked inside and copied down your personal information while you were searching for it. If you place a fraud alert, any business that accepts a credit application in your name and checks your credit would get a warning that something might be amiss.
You likely need an extended fraud alert if you’ve experienced identity theft. If you found out that a scammer opened a credit card in your name or posed as you on a loan application, you’ll want any companies that check your credit to take extra precautions. The alert remains on your credit report for seven years, in case the identity thief tries again once some time has passed.
And if you’re a member of the military who’s being deployed, you should get an active duty fraud alert. According to a 2020 report from the FTC, service members on active duty have a 22% greater chance of reporting a credit account fraudulently opened in their name than civilians do.
How Can You Set Up a Fraud Alert?
You can put a fraud alert on your credit report by contacting one of the three major credit bureaus. After you set up a fraud alert with one bureau, it will contact the other two for you, and they must place the same alert on your file, according to the FTC.
Here’s how to get in touch with each of the major credit bureaus to place a fraud alert.
— Equifax. Call 800-685-1111 or visit the Equifax Consumer Services Center page.
— Experian. Call 888-397-3742 or visit the company’s help page.
— TransUnion. Call 888-909-8872 or visit the company’s credit help page.
To remove a fraud alert, you can simply wait for it to expire. Or you can contact the credit bureaus and get it taken off your credit report early. You’ll be asked to show proof of your identity, such as a copy of your driver’s license and a copy of a recent bank statement.
— Equifax. Call 888-836-6351 or send the request by mail.
— Experian. Fill out a form online or mail it in.
— TransUnion. Log in to the TransUnion Service Center to submit your request.
What Is a Credit Freeze?
A credit freeze is a mechanism for hiding your credit report from potential creditors. “It basically locks down your credit report,” Schaub says.
A credit freeze can prevent criminals from opening new accounts with your identity, because businesses typically won’t approve credit applications without looking at the applicant’s credit report first.
You can set up a credit freeze for any reason. You don’t have to be a victim of fraud. And unlike a fraud alert, a credit freeze doesn’t expire.
While a credit freeze is in effect, your credit report is still visible to your current creditors and some government agencies, according to the Consumer Financial Protection Bureau. If you’ve signed up for a credit monitoring service, that company can view your credit report, too. And the FTC says a credit freeze won’t interfere with job applications, apartment rental applications or insurance applications.
But if you want to open a new credit account, you’ll have to lift the credit freeze first. This is also called “thawing” your credit. After the business checks your credit report, you can put the freeze back.
To freeze or thaw your credit, you can contact the three major credit bureaus at the same websites or phone numbers you would use to request a fraud alert. You have to contact all three bureaus, because they won’t notify each other of a credit freeze.
Parents can freeze their child’s credit from birth until the child turns 16. Anyone who is 16 years old or above can freeze their own credit.
Freezing or thawing a credit report is free, and it doesn’t affect your credit score.
Fraud Alert vs. Credit Freeze: How to Choose
Whether you should choose a fraud alert, a credit freeze or both depends on how closely you want to control information about your credit.
A credit freeze offers a higher level of protection because it prevents new creditors from seeing your credit report at all.
Schaub says that everyone should have a credit freeze in place to protect the sensitive data found in a credit report.
“You wouldn’t have that information lying around outside on your lawn or posted to the outside of your apartment door. So it’s good practice to just lock it down and make sure this can’t be accessed unless you’re actually engaging in a transaction that requires creditworthiness,” he says.
Kohlweiler also recommends that everyone freeze their credit because it provides more security than a fraud alert. “If you’re breathing, you should have a credit freeze, in my opinion,” he says.
Schaub cautions people not to assume they don’t need to guard their data just because they aren’t financially well off. Criminals don’t care. “They don’t do a financial liability check before they defraud you,” he says. “They just try to make purchases in your name.”
And both Schaub and Kohlweiler say that it makes sense to also set up a fraud alert if your identity has been stolen or you suspect you’ve been targeted for fraud.
[Read: Best Credit Cards for Good Credit.]
Do You Need a Fraud Alert and a Credit Freeze?
Fraud alerts and credit freezes work separately, so adding or removing one doesn’t affect the other.
In some cases, you might want both. You could set up a credit freeze to benefit from the stronger protection against fraudulent accounts. Then, if you’re worried about identity theft, you’ve been a victim of fraud or you’re deployed in the military, you should set up the appropriate fraud alert, too.
“It is not redundant, because when you remove the credit freeze, the fraud alert would still be on there,” Kohlweiler says. “And so that could lead the financial institution to do that step up authentication and additional verification.”
Whether you choose a fraud alert, a credit freeze or both, keep in mind that neither option protects your existing accounts from being taken over by a scammer. You still need to watch out for threats like phishing scams that target your account information or other personal details.
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Someone Opened a Credit Card in My Name. What Now?
Fraud Alert vs. Credit Freeze: Which Is the Right Choice for You? originally appeared on usnews.com
