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Credit Alert: How to use a fraud alert or credit freeze to protect your credit

Updated on June 4, 2011
Image by Tim Green aka atoach (via Flickr)
Image by Tim Green aka atoach (via Flickr)

Why use a credit alert?

We all know that identity theft is becoming an increasingly common problem in modern society. Our data moves around at high speed and there's often little we can do to protect ourselves. Even if you are completely responsible with your personal information, there is still a good chance that at some point your data will be stolen from a company that you do business with.

The question becomes: how do you protect your credit history when things are out of your hands?  The answer is a credit alert.

Credit Alerts: Fraud Alert and Credit Freeze

The two best credit alert options for you to be aware of are fraud alerts and credit freezes. Let's discuss what they are and the differences between them:

Fraud Alert: To place a fraud alert on your credit report, you must get in touch with all three of the major credit bureaus. These companies are: Equifax, Experian, and TransUnion. There are different kinds of alerts for different situations. Generally they fall into these categories:

  • Initial Alert: These remain active for a few months and are good if you are still unsure about whether you are the victim of identity theft.
  • Fraud Victim Alert: These are for consumers that know their information has been compromised and is actively being used by someone without authorization. They remain active for a period of years (usually seven).
  • Active Duty Alert: If you are a member of the armed forces, this is a one year alert that let's creditors that you are probably not the person making the inquiry as you are currently overseas.

All of these alerts are intended to warn creditors that they should take added precautions when reviewing a request for credit. Most creditors will heed that warning and ask you for extra information to make sure that they are dealing with the person they think they are. It is generally in their best interest to do so since identity theft hurts creditors as well as consumers. They simply don't want to get mixed up with bad accounts that will hurt their bottom line down the road.
However, there is NO legal requirement for a creditor to do anything different because of a fraud alert. Even though most upstanding creditors will pay attention to this credit alert, it is important to remember that this is merely an alert. If you need to "lock down" your credit, a credit freeze is a better credit alert option.

Credit Freeze: Like a fraud alert, you freeze your credit by speaking to each of the bureaus. Again, you have to speak to each of them individually since any single creditor may only work with one of the three bureaus. Since November 1, 2007, credit freeze has become a credit alert option nationwide (previously only citizens of certain states had this option available to them). There isn't one set price, but it usually costs about $10 to freeze your report with each bureau.

A credit freeze does what its name implies. Your credit is "frozen" and cannot be accessed unless you remove the freeze, or "thaw" it. That costs money too, and if you want to continue protection after a temporary thawing, you'll have to pay again. As you might imagine, this can get expensive very quickly. The credit freeze is only a good credit alert option for people that have ongoing identity theft issues and have no other way to protect themselves. Also keep in mind that removing a freeze can sometimes take as long as three days, so plan ahead if you have a freeze and know that you'll be seeking credit in the short term.

Credit Alert Video

The video above discusses when to use which credit alert.

Do you have more questions about credit alerts?  Post your questions in the comment section below.  Thanks for reading!


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