What's the Difference Between a Fraud Alert and a Credit Freeze?

You may wonder what to do if your personal financial information gets compromised. After all, reports of data breaches by cybercriminals have become almost commonplace. The 2017 Equifax® data breach, one of the largest in history, jolted many consumers and cybersecurity experts. They wondered how hackers were able to access 147 million Americans’ data at one of the major credit bureaus.  

Since then, Marriott International® reported in 2018 that 500 million Starwood hotel guests had data stolen. In 2020, easyJet informed 9 million customers of a breach, including more than 2,000 customers whose entire credit card profiles were compromised. And, in 2021, LinkedIn revealed that 700 million users’ data was exposed on the dark web.  Not the kind of professional connections users were hoping to achieve.

So, if you get word from a company you do business with that your information has been compromised or find out you’ve been a victim of identity theft, what should you do? We recommend freezing your credit or placing a fraud alert with the credit reporting agencies to prevent the cyberthieves from opening new credit in your name. 

Let’s look at the differences between these 2 defensive moves:

Fraud Alert

A fraud alert means your credit report has a special status that tells creditors or lenders that they must take extra steps to verify your identity before they extend you credit. 

There are 3 types of fraud alerts:

1. An initial Fraud Alert that lasts 1 year (and can be renewed)
2. An Active-Duty military alert for servicemembers that lasts 1 year and can be renewed during the length of deployment 
3. An extended Fraud Alert that lasts 7 years

You can notify one of the 3 major credit reporting agencies if you want to place a Fraud or Active-Duty Alert, and the others will be notified. The 3 major credit reporting agencies are: TransUnion®, Experian® and Equifax. In addition, you can proactively alert Innovis®, a fourth credit-reporting bureau, that’s been on the rise since the Experian breach in 2017. 

Make sure the bureaus have your current contact information. For Active-Duty alerts, you’ll need a government-issued proof of identity, like a driver’s license or passport. You’ll receive a confirmation from each company when they’ve added an alert to your report. However, you’ll need to contact Innovis separately. Keep in mind, fraud alerts can be removed anytime online.

What You Need to Know Before Placing a Fraud Alert

If you want to apply for new credit, having a fraud alert may slow the process. Tell your lender at the time you apply that you have an active fraud alert on your account.

Cost

Fraud alerts are free.

What an Alert Can't Do

An alert doesn’t stop the opening of a new account or new line of credit. It just alerts companies that they must verify your identity. It’s important to remember that if a company doesn’t require a credit check to open an account, they won’t know about the alert. Thus, you won’t be notified of the request. While it’s not a guaranteed solution, a fraud alert does give you some peace of mind.

Credit Freeze 

A credit freeze, or security freeze, tells credit reporting agencies not to allow access to your credit reports. This means potential lenders can’t view any of your information. It will be more difficult for identity thieves to open new accounts in your name, but government agencies and existing creditors (or their debt collectors) may still have access. You can also request a credit freeze for your minor children.

What You Need to Know Before Freezing Your Credit

A credit freeze can prevent legitimate credit checks for things like a new credit card, a new job, utilities or an apartment lease. Companies can’t get your credit report unless you temporarily lift your credit freeze. Because of new legislation,  the bureaus now have online pages where you can request a freeze or the temporary lift more quickly. 

Cost

Thanks to new consumer protections, the Federal Trade Commission (FTC) says that you now have access to unlimited, free credit freezes. They can be lifted at any time without a fee.  As with a fraud alert, you’ll need to contact Innovis separately from the other 3 bureaus to activate or lift your freeze. 

What a Credit Freeze Won’t Do

Even with a credit freeze, you’ll still be able to get a credit report every year. Although it’s designed to prevent fraudsters from opening new accounts, a credit freeze won’t prevent charges to your existing accounts. 

Stay Vigilant

Whether you have a fraud alert on your credit report or place a freeze on it, stay aware of suspicious activity on current credit accounts by monitoring all financial and insurance statements. Finally, notify financial institutions or insurance companies immediately if you notice something that causes concern. 

For a Navy Federal Credit Union account, you can quickly report an inaccurate transaction, unauthorized transaction or lost or stolen card.