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

If you’re considering placing a fraud alert or a credit freeze on your credit report, it’s important to know how they’re different.

by Navy Federal on October 6, 2017 | Tag(s): Security

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Reports of data breaches that exposed personal information to cybercriminals have become almost commonplace. The recent Equifax® data breach, the largest in history, has many consumers concerned.

If you’re one of the 143 million people affected, we recommend freezing your credit or placing a fraud alert with the credit reporting agencies to prevent criminals from opening new credit accounts in your name. The credit reporting agencies are:

Fraud Alert

A fraud alert means your credit report has a special status that tells creditors or lenders that before they extend you credit, they must verify your identity. There are three types of alerts:

  • An initial fraud alert that lasts for at least 90 days (and can be renewed)
  • An Active Duty military alert that lasts a year
  • An extended fraud alert that lasts seven years

You can notify one of the major credit reporting agencies if you want to place a fraud or Active Duty alert, and the others will be notified. Make sure they have your current contact information, and 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. 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 prevent the opening of a new account. It merely alerts companies that they must verify your identity. However, if a company doesn’t require a credit check to open an account, they won’t know about the alert, and you won’t be notified of the request. So having one isn’t a guaranteed solution.

Credit Freeze

A credit freeze tells credit reporting agencies not to allow access to your credit reports. This means potential lenders won’t be able to view any of your information, and it will be more difficult for identity thieves to open new accounts in your name. However, government agencies and your existing creditors (or their debt collectors) may still have access. You can also request a credit freeze for your minor children, if your state has the service. State laws vary on how long a credit freeze lasts. In some, a freeze lasts seven years, but in most states, a freeze is active until you remove it. As of the date of this writing, Kentucky, Nebraska, Pennsylvania and South Dakota remove a freeze after seven years.

What You Need to Know Before Freezing Your Credit

A credit freeze can prevent legitimate credit checks. If you’re applying for something that requires a credit check (like a new credit card, a new job, utilities or renting an apartment), those companies won’t be able to obtain your credit report unless you temporarily lift your credit freeze. Experian suggests allowing up to three days for the change to take effect.

Cost

According to the Federal Trade Commission (FTC), fraud victims can place a freeze for free. If you’re not a victim, costs vary by state and can range from free to $10 for each credit reporting agency, every time you freeze or unfreeze your reports.

What a Credit Freeze Won’t Do

Even with a credit freeze, you’ll still be able to get your free 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. Make sure you monitor all financial and insurance statements for suspicious activity, and notify your financial institutions or insurance companies immediately if you notice something suspicious.

Navy Federal Can Help

Visit Navy Federal’s Security Center to learn about other ways you can protect yourself and keep your personal information secure.

This article is intended to provide general information and shouldn't be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.