Every consumer has three reports, managed by credit bureaus TransUnion, Experian and Equifax. As the source of all credit information, credit reports contain a variety of sensitive data, including:
When identity theft occurs, a scammer may use your information to make additional purchases or even open new accounts in your name. The result is credit damage that often leads to lost reputation, higher interest rates, inability to gain new credit, and long-term issues.
Whether identity theft is suspected or materialized, there are ways to minimize credit damage and prevent future problems from occurring. You have the option of placing a fraud alert or credit freeze in your credit reports. So, which one should you choose?
What is a fraud alert?
As a free service, a fraud alert is a 90-day protective measure offered by the credit bureaus. Placing a fraud alert in your file prevents anyone from opening a new account or acquiring a loan in your name. Lenders must contact you directly before approving credit applications as well. For example:
Suppose an identity thief is attempting to open a new credit card in your name. Before approving the new account, the lender is instructed by the fraud alert to contact you for verification of the application. You inform the lender that you did not apply for a new credit card, blocking access to the scammer and protecting your credit in the process.
In addition to credit protection, fraud alerts have the following benefits:
What is a credit freeze?
As an added measure of protection, a credit freeze prevents even lenders from accessing your credit file without permission. For example:
Suppose you decide to buy a new car while a fraud alert is active in your file. The dealership must run a credit check during the financing process, but their request is denied while a credit freeze is in place. You must grant the dealership access to your file using a PIN number provided by the credit bureau.
Benefits of a credit freeze include:
The bottom line: The credit bureaus have come a long way when it comes to helping consumers recover from theft and safeguard their credit files. Consult a professional when deciding which measure of protection to use.