In the world of credit, you’ve probably heard the terms “fraud alert” and “credit freeze.” You have the right to add either one to your credit report, but what’s the difference between the two?
What is a fraud alert on a credit report?
A fraud alert notifies creditors who view your credit report that they must verify your identification before approving credit in your name to ensure someone isn’t using your information without your permission. Placing a fraud alert at one of the three major credit bureaus (Experian, TransUnion or Equifax) will automatically add the alert to your credit reports at the two other bureaus.
You can request one of three types of fraud alerts:
- Temporary fraud alert: Also known as an initial fraud alert, you can add this alert whenever you want, for any reason, such as simply wanting extra protection from fraudsters. It encourages lenders and creditors to take extra steps to verify identity, such as contacting you by phone, before opening a new credit account or making changes to existing accounts. This type of alert expires after one year unless you renew it.
- Extended fraud victim alert: An extended fraud victim alert can be placed to help protect victims of credit fraud or identity theft from further fraudulent activity. If you’ve reported an incident of credit fraud or identity theft to authorities, you can obtain an extended fraud alert by submitting a copy of the report you filed with a law enforcement agency. This warns lenders that you are a confirmed fraud victim and to call before opening a new credit account or making changes to existing accounts. This alert lasts seven years on your credit file.
- Active-duty fraud alert: Active-duty service members can set up this type of alert when they’re deployed. An active-duty fraud alert lasts one year, and it can be renewed as long as needed during deployment.
All fraud alerts can be renewed (up to three months before they expire), but active-duty and extended fraud victim alerts require you to resubmit the required documentation.
When to lift a fraud alert
A fraud alert shouldn’t present a barrier to you securing new credit, so it’s unlikely you’ll need to lift it before it expires. If you do decide to remove a fraud alert or let it expire, you should do so only if you’re certain that you’re out of immediate danger of fraud or identity theft. To lift a fraud alert, you’ll need to contact each credit bureau individually.
What is a credit freeze?
A credit freeze, also called a security freeze, restricts creditors from accessing your credit report to open new credit accounts in your name. A credit freeze is designed to protect consumers from fraud.
While a credit freeze limits access to your credit report, it doesn’t keep all people and organizations from looking at it. Aside from you viewing your own report during a freeze, others that can view it include:
- Current lenders and card issuers that conduct credit checks to manage accounts
- Landlords and rental agencies that are reviewing your application to become a tenant
- Debt collectors pursuing a payment
- Credit card issuers that have prescreened you for credit offers
- Prospective employers who’ve gained your permission to conduct a background check
- Child support agencies
- Government agencies carrying out court orders or warrants
You can freeze your credit at any time, but you must contact each of the three major credit bureaus to do so. There is no fee to either freeze or unfreeze a credit file.
When to unfreeze your credit
You can temporarily thaw or permanently unfreeze your credit report whenever you want. A temporary thaw involves setting a start and end date for unfreezing your report, while permanent removal means the freeze is no longer in effect unless you reactivate it.
When you plan to apply for new credit—such as a credit card, mortgage or auto loan—you should thaw or unfreeze your credit report. Otherwise, a potential creditor won’t be able to see your credit report and thus will not be able to evaluate your application.
Should you use a fraud alert or a credit freeze?
If you’re a victim of credit fraud or identity theft, choosing between an extended fraud alert and a credit freeze may come down to how often you expect to need access to your credit reports.
If you plan to apply for several types of new credit, such as an auto loan, mortgage or credit card, within the next few years—or perhaps you’re eyeing a new apartment or new cellphone service provider—it might be simpler to activate an extended fraud alert instead of a series of credit freezes and thaws.
If you don’t plan to apply for a new credit card or loan in the near future, a credit freeze might be the best choice. However, you may need to thaw your credit reports if non-lenders like cellphone and internet service providers need to conduct credit checks.
If you’re worried that your personal information has been compromised but you haven’t been the victim of crime, consider setting up a temporary fraud alert. You can cancel the fraud alert at any time or renew it each year, depending on your circumstances.
For more information on identity theft and fraud, see the following articles: