Fraud Alert v Security Freeze: Is One Right for Your Credit Report?

Instances of credit fraud and identity theft have almost doubled in the last decade, and the steepest rise has come since the financial crash of 2008. Protecting your credit and your finances involve more than the important basics of paying bills on time and not overspending. It also involves monitoring your credit reports and taking action when unauthorized activity occurs. There are two primary tools available to empower consumers to safeguard their credit identities and profiles – fraud alerts and security freezes. Which is used under what circumstances?

Free Credit Reports

The US law changed last year to allow one free credit report per reporting agency. Knowing what is on your credit report from each of the three major reporting agencies is the first step in protecting yourself.

Clean up old or mistake-ridden reports. Keep “good” credit entries indefinitely.

You are entitled to a free report annually or when credit applications are denied. Take full advantage of these legal allowances.

Fraud Alerts

The next step in protecting your credit profile and credit history is to know the difference between a fraud alert or a security freeze. Knowing the difference will allow you to place the correct level of protection on your credit report.

Fraud alerts are like warning flags on your credit report. It’s not a deterrent to credit application acceptance but notify the creditor that you might have been victim to credit fraud or identity theft. The creditor takes additional steps to verify the applicant knows of and is the one actually submitting the application.

Fraud alerts don’t prevent viewing of your credit report, whether under legitimate reasons or nefarious conditions. Creditors can still accept, grant or refuse credit applications based on the credit history reflected.

Fraud alerts are free: If any reporting agency or creditor charges you a fee to place a fraud alert flag your report, report them.

Types and Duration of Most Alerts

There are three common types of fraud alerts and different durations of each.

An Initial Fraud Alert is placed on your report for 90 days by the reporting agency at your request. You might consider this flag if you have been victim of credit fraud or that you might become a victim.

Active Duty Fraud Alerts are noted for active duty military or those called to active duty and are noted on the report for one year if you are ordered away from your home area. Active duty alerts remove your name from pre-screened offers for two years.

An Extended Fraud Alert is valid for seven years. Creditors are required to contact you at the phone number you provide the credit reporting agency when you request the extended alert. This number will not be noted on your credit report for casual perusal. You must present a valid police report documenting the fraudulent activity to qualify for an extended alert on your credit report. Telling the agency that you might have been or were a victim of fraud or identity theft isn’t quite enough to flag your credit report.

You should receive a confirmation when any of these fraud alerts are placed on your credit report.

Security Freezes

A security freeze grants a higher level or protection on your credit report, and many states require free status of the alert. However, some states and credit reporting agencies may be allowed to charge a small fee for this service.

Security freezes block access to your credit history. You can grant limited access by requesting creditor by entering a “secret code” that unlocks the information for that creditor only. Exemption: Those allowed by law avoid the block, such as law enforcement with proper legal authority for investigative purposes.

Security freezes remain on your credit report indefinitely or until you remove it. There may be an annual fee, however.

Security freezes give the most control over information access and prevents new cards or loans from being issued without your knowledge. They don’t, however, prevent all forms of identity theft or issuing additional cards on current credit card accounts.

Jaye Ryan is a freelance writer who loves writing about responsible financial management and credit issues for Octopus Loans.

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