When to Place a Fraud Alert on Your Credit Report
A fraud alert is placed when you have become, or believe you may become, the victim of identity theft.
Place a Fraud Alert for Potential Identity Theft
Let’s consider a scenario where you receive an email that appears to originate from your bank, alleging suspicious activity on your account and asking for immediate verification of personal information.
Alarmed by their message, you quickly follow the provided link and enter your private credentials. Two minutes later, you realize what happened and suspect the email might have been a phishing scheme.
Alarmed about the potential for fraudulent activity on your credit, this is the perfect time to contact the credit reporting agencies to place a fraud alert that lasts up to one year.
There’s no confirmation of fraudulent activity in this situation yet, but you place a fraud alert to implement preventative measures.
Place an Extended Fraud Alert for Known Fraud
Consider this second scenario. A month ago, you lost your wallet containing your social security card, credit cards, and other personal identification documents. Since then, you’ve been vigilant, frequently checking your credit reports and bank statements for any suspicious activity.
One day, you notice unfamiliar transactions on your credit card statement. You’re certain you haven’t made these purchases, and alarm bells start ringing. You contact your bank, who confirms that your credit card has been used fraudulently.
You immediately report the crime to the police and obtain an official police report, providing concrete evidence of fraud.
With the police report in hand, you contact the credit reporting agencies. This time, you can place an extended fraud alert. The police report allows you to extend the duration of the fraud alert from one year to seven years, providing you with long-term protection against additional bad debt and fraudulent activities on your credit report.
A Credit Freeze: Digging Deeper
A credit freeze, or a security freeze, serves as a robust shield for your credit information against fraudulent activities. It halts any access to your credit report, therefore, any lender trying to view it will be unable to do so unless you provide the go-ahead by unfreezing it. This is achieved using a unique Personal Identification Number (PIN) that you receive when you first place the initial freeze.
Advantages of a Credit Freeze
- Robust Protection: A credit freeze offers stronger protection compared to a fraud alert as it completely restricts access to your credit report.
- Control in Your Hands: You hold the power to allow or deny access to your credit report, providing you the ultimate control.
- Unique PIN: A special PIN is provided when you activate a freeze, which is required when you wish to lift the freeze.
- Proactive protection: Credit freezes are a proactive way of ensuring that your credit report remains secure.
Disadvantages of a Credit Freeze
- Requires Effort: Unlike a fraud alert, you need to contact each credit bureau individually to place a freeze.
- Potential Delays: Unfreezing your credit report when needed can cause delays in credit application approvals.
- Dangerously Strict Identity Protection: If you lose your PIN or can’t answer the security questions, expect a tedious process to unfreeze your credit report.
When to Place a Credit Freeze
The best time to stop a problem is before it begins.
Placing a freeze on your credit prevents any fraudster from accessing it and using it to their benefit. A credit freeze offers more comprehensive protection than a fraud alert, as it prevents the credit from being accessed in the first place.
Place a Credit Freeze for Proactive Protection
You can place a credit freeze even if you don’t suspect any fraud or suspicious activity. Let’s say you’ve been a great money manager over the years; you’ve built up excellent credit, making you an attractive target for identity thieves. While you haven’t detected any suspicious activities, you understand the potential risk.
You decide to be proactive in protecting your financial health and reputation. You understand that a credit freeze can prevent unauthorized parties from accessing your credit report and opening new credit accounts in your name, effectively making it more difficult for identity thieves to exploit your good credit and harm your FICO score.
You contact each of the three major credit bureaus to place a credit freeze on your accounts. It may require a bit more effort, but you believe the enhanced protection is worth it. You securely store the unique PINs provided by each bureau, knowing they’re the keys to lifting the freeze should you need to apply for credit in the future.
By placing a credit freeze proactively, you take control of who has access to your credit report, thereby significantly reducing the chance of becoming a victim of identity theft.
Place a Credit Freeze After Identity Theft
Although a credit freeze is done as a preventative measure, anyone who has had to recover from a stolen identity knows they don’t want to go through it again.
Let’s go back to the unfortunate situation where you’ve had your wallet stolen. After gathering evidence of identity theft and filing a police report, you contact the credit bureaus and place an extended fraud alert to last seven years. On top of that, you immediately place a credit freeze with each credit bureau.
By doing both, you take advantage of the fraud alert’s heightened monitoring and the freeze’s strong protection. Armed with more than one layer of defense, you’re taking meaningful steps and your identity is much safer from being compromised again in the future.
