Fraud Alert vs. Credit Freeze: What’s the Difference?

If you suspect that fraudsters have targeted your personal information and accounts, the unfortunate reality is that you’re probably right. A case of identity theft occurs every two seconds in the U.S. Fraudsters are relentless, but that doesn’t mean you are defenseless against their attacks. 

Two ways you can protect yourself are through fraud alerts and credit freezes. A fraud alert and a credit freeze are tools that help protect your credit and personal information, but they work differently and serve distinct purposes. Let’s walk through fraud alert vs. credit freeze options and explore how you can use each to secure your credit report. 

What Is a Fraud Alert?  

Fraudsters trying to open up new credit lines in your name will need to approve a hard credit check from the lender. If you can put a fraud alert in place first, any lender must verify your identity before accessing your credit report to open new credit accounts. 

Fraud alerts fall into three main categories.

The 3 Types of Fraud Alerts

Initial Fraud Alert – Available even if you only suspect that you’re a victim of fraud, this alerts lenders that your personal details are vulnerable and require the lender to take extra steps to verify your identity. The initial fraud alert is valid for one year and renewable. 

Extended – If your identity has actually been stolen, you can put an extended fraud alert in place, providing you’ve completed a police or FTC identity theft report. This alert is valid for seven years and stops any new account creation in your name without identity verification. You can also view your free credit report twice a year rather than once only.

Active Duty – Service members away on deployment are vulnerable to ID theft. The active duty alert, valid for one year and renewable, puts an extra layer of security in place by stopping any account access without identity verification. 

How Do I Place a Fraud Alert? 

You do not need proof of identity theft to implement a fraud alert. If your ongoing credit monitoring shows anomalies in your credit report, simply contact one of the three credit reporting bureaus, who must notify the others by law.  

How Much Does a Fraud Alert Cost?

Placing a fraud alert on your credit report is usually free. You only need to contact one of the three major credit bureaus (Equifax, Experian, or TransUnion), and they will notify the other two.

Can I Lift a Fraud Alert? 

A fraud alert will typically last for 12 months, after which you can choose to renew it. A fraud alert does not restrict access to your credit report. You can continue to monitor your credit and receive your credit reports.

What Is a Credit Freeze? 

While a fraud alert requires lenders to verify your identity before accessing your credit report, a credit freeze locks out any unauthorized third parties from your report altogether. A credit freeze, also known as a security freeze, makes it nearly impossible for creditors to open new accounts in your name without your permission.

How Do I Freeze My Credit Report?

To request a credit freeze, apply directly to each of the three main reporting bureaus. Once in place, the freeze is active until you choose to remove it. 

Who Can Access Your Credit with a Credit Freeze?

Note that existing creditors, debt collectors, and government agencies will still be able to see your credit report while a credit freeze is in place. Any third parties who were granted access before the credit freeze have authorization, whereas the purpose of the credit freeze is to exclude new and unwelcome access. 

How Much Does a Credit Freeze Cost?

Placing a credit freeze is free. However, depending on your state and circumstances, fees may be associated with placing, temporarily lifting, or permanently removing a credit freeze. Some states provide free credit freezes for specific situations, such as identity theft victims.

Fraud Alert vs. Credit Freeze — Which Should I Choose? 

Both fraud alerts and credit freezes are effective measures you can take to secure your accounts against malicious attacks. They are not interchangeable, however, based on these subtle differences:

• A credit freeze removes third-party access to your credit report, whereas a fraud alert merely requires lenders to secure your approval and verify your identity. In that sense, a credit freeze is the more robust option. 
• You can put a credit freeze in place without fraud having taken place and with a quick phone call. For extended fraud alerts, on the other hand, you’ll need to file the relevant police and FTC reports first. 
• A fraud alert expires at the end of a set period, whereas a credit freeze remains in place until you decide to remove it. 

Do I Need Both Credit Freeze and Fraud Alert? 

Nothing is stopping you from implementing both, although in most cases, that shouldn’t be necessary. If you have solid proof of being a victim of identity theft, the priority should be to cancel your existing credit cards and loans or alert the lenders. Your choice between credit freeze or fraud alert will then come down to whether you want to “set it and forget it” or manage restrictions until you decide to lift it, or it expires at the end of the prescribed period. A credit freeze accomplishes the former, a fraud alert the latter. 

Will a Credit Freeze or Fraud Alert Hurt My Credit Score? 

Neither will affect your credit score. Far from it, in fact. By locking unauthorized third parties out of your credit report, you are preventing the opening of new credit lines that could impact your credit score significantly.  

Ongoing credit monitoring is your best defense if you want to secure your credit report before fraudsters can find a vulnerability. Find out how SmartCredit’s suite of credit monitoring tools can help you identify anomalies or errors that may indicate fraudulent activity. 

References: 

FTC – What To Know About Credit Freezes and Fraud Alerts

IdentityTheft.gov – Identity Theft

Investopedia – Credit Fraud Alert Definition

State of Michigan Attorney General – Credit Freeze; Fraud Alert; and Credit Monitoring Consumer Alert