November 04, 2010

Difference between credit freeze and fraud alert

Dear Consumer Ed:

I lost my wallet last week. I have cancelled all of my credit cards and got a new driver’s license, but I am still worried about the possibility of someone stealing my identity.  Someone suggested that I should file a fraud alert or do a credit freeze.  What exactly are they, and which one should I use?

Consumer Ed says:

A fraud alert and a credit freeze are both ways of preventing an identity thief from opening up a new credit account in your name.  Fraud alerts are generally used in situations like yours – loss of a wallet or a credit card – or when someone has noticed suspicious activity on their credit card bills or credit report. A fraud alert is free and will remain on your credit report for 90 days. With an initial fraud alert in place, potential creditors are supposed to take steps to verify that any request for new credit in your name was authorized by you.  However, those steps may not always alert them that you are not, in fact, the applicant, and new credit may be extended despite the fact that you filed the initial alert.

If you have actually been a victim of identity theft, you can go one step further and file an extended fraud alert.  Extended fraud alerts, (which are also free of charge), stay on your credit report for seven years.  If you have filed an extended fraud alert, a potential creditor must actually talk with you or meet with you before extending new credit.

To place an initial or extended fraud alert on your credit report, contact ONE of the three credit reporting agencies listed below. That credit bureau is required by law to contact the other two bureaus, which will in turn place the alert on their versions of your credit report. 

A credit freeze is considered more fool-proof than a fraud alert.  When you freeze your credit, potential creditors will not even be able to see your credit report unless you grant them access by temporarily lifting the freeze.  For Georgians, there is no charge to freeze or unfreeze your credit. You must contact all three of the credit reporting agencies listed above to effectively freeze access to your credit.

If you discover that you are a victim of identity theft, there are five things that you should do immediately:

  • Place a fraud alert on your credit reports;
  • Get copies of your credit report from each of the three credit reporting agencies, and review them carefully; 
  • Close any accounts that were opened fraudulently or that have been tampered with;
  • File a report with your local police or the police in the community where the identity theft occurred; and
  • File an identity theft report with each of the three credit reporting agencies.

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