Do You Need a Credit Alert, Credit Freeze, or Credit Lock?
Last year the data breach at Equifax compromised the records of over 140 million people. In the wake of the breach, Equifax offered consumers a year of free credit monitoring. This offer, which has also been made by other breached companies, helps people whose data may have been stolen take action against identity thieves who try to open fraudulent credit accounts. But what should you do once the free year of monitoring has passed? If your data was exposed in the Equifax hack or any other data breach, it’s still vulnerable and could be used to steal your identity at any time.
Three steps you could potentially take to protect yourself are credit freezes, credit locks, and credit alerts. Each has its pros and cons.
What is a Fraud Alert?
Credit alerts, or fraud alerts, are a free service that force a business to verify your identity before it issues new credit. Usually that will come in the form of a phone call asking you if you really tried to open the new account.
You can go to any of the three major credit bureaus to request an alert. The bureau you contact will notify the other two and alerts will be added to all three. Expect to receive confirmation from each agency after the alert is added. If you don’t receive confirmation, contact the bureau you haven’t heard from.
A fraud alert used to last only 90 days, but thanks to new legislation in 2018, a standard alert now lasts the entire year. If you have been the victim of identity theft, you can get an extended fraud alert lasting seven years. You can renew your alert, but keep track of the end date because it will expire automatically.
If you’re in the military, you can get an active-duty credit alert while deployed. This credit alert doesn’t require the lender to contact you directly before issuing credit, but it does require them to take “additional steps” to verify your identity. The initial active-duty credit alert lasts for a year and can be renewed for the length of your deployment.
What is a Credit Freeze?
A credit freeze prohibits a credit agency from disclosing your credit report to anyone. Without the ability to check a credit report, lenders won’t extend credit to anyone attempting to open an account in your name. That includes identity thieves, but it also includes you. You will still be able to access your existing credit accounts, but if you want to take out a new loan, you’ll have to unfreeze the report.
In the past, freezing your credit required you to pay a fee, as did unfreezing it again. But the same legislation that extended the duration of fraud alerts made credit freezes free for everyone. They can be a bit of a hassle to set up, however, since you have to contact each credit bureau individually to request a freeze and they all have their own process.
You can freeze and unfreeze your credit as often as you want, always for free.
What is a Credit Lock?
A credit lock offers very similar benefits to a credit freeze. In both cases, it restricts lenders from being able to check your credit report, making them unlikely to offer a loan. In both cases, you have to request the service from each credit bureau individually. However, a credit lock is easier to implement and to remove. You can do it instantly from your computer or, in the case of TransUnion, a mobile app, without needing a PIN or the amount of identifying information that a freeze asks for.
On the downside, you will pay for a credit lock. Two of the bureaus now offer free credit lock services, but you will pay a monthly fee at Experian.
Which Credit Protection to Choose
All three strategies will help protect you against identity theft and resulting bad credit, but they each have their own benefits or disadvantages. A fraud alert is a good choice if you still want easy access to your own credit. For example, if you are about to take out student loans or a mortgage and you don’t want to have to unfreeze your credit to do it. Alerts also have the advantage of being easy to implement, since you only have to contact one of the three credit agencies.
However, fraud alerts depend on creditors to comply with the regulation and confirm your identity when asked. They have occasionally been known to ignore the alert. A credit freeze or lock will prevent them from checking your credit at all.
Credit freezes and locks can be a bit harder to differentiate from each other. A credit freeze is regulated by the federal government while a credit lock is basically a contract between you and the credit agency. Therefore, a freeze offers stronger legal guarantees.
With a credit lock, you are basically paying for the convenience of locking and unlocking the account quickly. Considering that all agencies offer online portals to freeze or unfreeze your credit within one business day, for most people that small added convenience will not be worth much.
None of these methods will directly affect your credit score or prevent you from accessing your annual free credit report. They all offer ongoing protection against the misuse of your personal data and your good credit.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendation for any individual.