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Fraud Alert vs Credit Freeze: What Should I do?

Credit Card Fraud

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You’ve just had a fraud alert.  Or, a credit freeze.  What are the differences between them, and how can you resolve this situation?  Check out what we break down, below:

A fraud alert and/or credit freeze are instigated to prevent identity theft and fraud. A fraud alert is a notice given to the credit reporting bureau, stating that a consumer’s identity is possibly stolen. A fraud alert can protect you from someone opening fraudulent credit accounts in your name.

A credit freeze is an anti-fraud measure to protect your account. The credit bureau refrains from sharing a consumer’s credit report with someone else. So if a consumer suspects that their identity may have been stolen, they can initiate a credit freeze.

There are signs you can read that can indicate if your identity has been stolen.  Here are a few:

  • Your bank statement doesn’t look right or your checks bounce
  • You see unfamiliar and unauthorized activity on your credit card or credit report
  • Your bills are missing or you receive unfamiliar bills
  • Your cellphone or another utility loses service

Choosing Fraud Alert or Credit Freeze: Which One?

What is a Fraud Alert?

A fraud alert requires the creditors to verify their identity before opening new credit. Fraud alerts are free. You can contact any one of the three credit bureaus (Equifax, Experian, and TransUnion) for clarification of any issues regarding fraud alerts.

Types of Fraud Alerts

There are three types of fraud alerts: 

  • Initial Fraud Alerts
  • Extended Fraud Alerts
  • Active-Duty Fraud Alerts

Initial Fraud Alert

The initial fraud alert is valid for 90 days. It does not require any evidence for prior identity theft. If you raise a request in any of the credit bureaus and the others will get notified. It entitles you to a free credit report from each of the bureaus. 

Extended Fraud Alert 

The Extended Fraud Alert is valid for 7 years. It requires a copy of the identity theft report. If you raise a request in any of the credit bureaus then you get 2 free credit reports.

An extended fraud alert attaches a notice to your credit report that indicates you are a fraud victim. The extended fraud alert may include some of these issues:

  • Credit card issuers
  • Landlords
  • Potential employers
  • Car insurance companies
  • Car rental agencies

Active-Duty Fraud Alert

An active-Duty fraud alert is valid for a year. This alert is for military service members. You can renew the length of deployment. The credit bureaus will remove your name from marketing lists for unsolicited credit. 

What is Credit Freeze?

A credit freeze is an anti-fraud measure to protect your account. You can place a credit freeze on your credit report. 

Lifting or removing Credit Freeze

You can lift your credit freeze temporarily or permanently. It is free to lift your credit freeze permanently. But there are certain charges for a temporary lift.

You can lift the freeze for a specific date range or for a specific lender. Some credit bureaus will give you a temporary password to share with the prospective lender. So that they can use it to pull your credit.

The costs may vary by state and also depend upon whether you are a victim of identity theft or other circumstances.

Freezing and Unfreezing your Credit Account

You should submit requests to each of the three credit bureaus, to freeze your credit reports. You can make an online or a phone request to freeze your account.

You must unfreeze your credit account before applying for any credit or other services. If you do not unfreeze your credit file before filing an application, the business will not be able to process your application.

If you have any pending credit applications, or if you plan to apply for new credit in the future, consider postponing your credit freeze.

Credit Report Lock

A credit report lock is a simpler way to control access to your credit report than a credit freeze. It is another helpful way to provide extra protection to unauthorized access.

Fraud Alert vs Credit Freeze: Advantages and Disadvantages 

Fraud Alert Advantages:

  • You will get a phone call if someone trying to open a new account
  • It is free of cost
  • Do not require any police complaint regarding theft.
  • It is convenient to place an initial fraud alert.

Fraud Alert Disadvantages:

  • Do not prevent identity theft
  • It expires automatically

Credit Freeze Advantage:

Your credit cannot be pulled unless you lift the freeze yourself. 

Credit Freeze Disadvantage:

Lifting credit freeze costs about approximately $10 every time with the credit bureaus.

Fraud Alert vs Credit Freeze Protection

It is better to use both fraud alert and credit freeze as a dual protection to your account. It is a combined security strategy. 

If you wish, it is possible to put a fraud alert on a credit freeze. You are notified if anyone tries to access your frozen account.

If you’ve already undergone identity theft, then consider credit repair services.

Fraud Alert vs Credit Freeze: Impact on Credit Scores

A credit freeze will restrict you from who can look at your credit reports. The credit scores will not get affected or stop you from using credit. You need to unfreeze the credit before using them.

A fraud alert does not have an impact on your credit scores. It is easier to apply for credit even if you have a fraud alert.

Also Read:

Key Takeaway

Both the credit freeze and fraud alert are valuable tools for combating identity theft and credit fraud. It is good to know about them and be ready to use them when you need them. 

If you discover a problem, act quickly to dispute fraudulent charges in order to limit your liability. 

Frequently Asked Questions

Does a credit freeze prevent fraud?

A credit freeze can prevent someone from committing credit fraud by opening a credit account in your name without your permission.

What is the difference between credit freezing and credit locking?

It is easier to unlock a credit lock than a credit freeze. But a credit freeze may afford legal protections than a credit lock.

Is a mortgage loan available with a fraud alert?

A fraud security alert slows down the mortgage approval process. But it will not stop it altogether. Your lender should take reasonable action in response to the security alert. Verification of identity is a must.

Can you still build the credit score with a credit freeze?

A credit freeze does not have any impact on your credit scores. Your existing creditors can run periodic annual reviews, and a person can still build credits.

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