Lowering Your Risk of Identity Theft: Credit Freezes vs Fraud Alerts

It’s important to be proactive in order to protect yourself from fraudsters who may try to open new accounts in your name. Two ways to do this are by credit freezes and fraud alerts. In this blog post, we’ll take a closer look at both options so that you can decide which one would work best for you.

What is a Credit Freeze?

A credit freeze is a tool that you can use to prevent new accounts from being opened in your name. When you place a freeze on your credit, businesses will not be able to access your credit report, which means they will not be able to extend credit to you. In order to unfreeze your credit, you must contact each of the three major credit bureaus (Equifax, Experian, and TransUnion) individually and provide them with a personal PIN or password that you will create.

One advantage of a credit freeze is that it is free—you can place or lift a freeze at any time without having to pay a fee. Additionally, freezing your credit does not negatively impact your credit score. However, there are also some drawbacks to consider. For example, if you need to apply for a loan or open a new line of credit, you will have to lift the freeze temporarily, which can be inconvenient. Additionally, if you forget your PIN or password, it can be difficult to regain access to your account.

What is a Fraud Alert?

A fraud alert is another tool that you can use to protect yourself from identity theft. Unlike a credit freeze, a fraud alert allows businesses to access your credit report— however, it also requires them to take extra steps to verify your identity before extending credit to you.

There are two types of fraud alerts that you can place on your account: an initial fraud alert and an extended fraud alert. An initial fraud alert stays on your credit report for 90 days and an extended fraud alert stays on your report for seven years. You only have to contact one of the three major credit bureaus (Equifax, Experian, or TransUnion) to place an initial fraud alert— they are required by law to contact the other two bureaus on your behalf. To place an extended fraud alert on your account, you must provide the bureau with proof of identity theft such as a police report.

Like credit freezes, fraud alerts are free and do not negatively impact your credit score. However, there are also some potential drawbacks associated with placing a fraud alert on your account. For example, because businesses have to take extra steps to verify your identity before extending credit to you, it can make it more difficult for you to get loans or open new lines of credit. Additionally, if you place an extended fraud alert on your account and later decide that you want to remove it, you have to go through the process of contacting each bureau individually and requesting that they remove the alert from your file— which can be time-consuming and inconvenient.

Conclusion

When it comes down to it, only you can decide whether a credit freeze or a fraud alert is right for you. Both options have their advantages and disadvantages—it just depends on what considerations are most important to you as an individual. Are you worried about the inconvenience of having to lift a freeze every time you apply for new credit? Or are you more concerned about the possibility of identity theft? Weighing the pros and cons carefully should help you make the decision that’s best for YOU when it comes to safeguarding your personal information.

At Global Legal Law Firm, our lawyers are familiar with the rapidly changing nature of electronic payments processing, and the ever changing regulations involved, with decades of expertise in ISOs, processors, commercial collections, credit card brands, and other forms of electronic payment processing litigation. Let us guide you through this new and volatile environment, rather than attempting to navigate it on your own.