Continuing from my last post, you have advised the credit reporting agencies of identity theft and filed a police report, now you have three options for your next step. The goal of the next step to prevent further fraud. Here are your choices:

  1. Fraud Alert: Your credit file at all three credit reporting agencies is flagged for possible identity theft issues. If a potential lender reviewed your credit history and saw the fraud alert, they would not lend money or issue credit unless they made sure it was you that was initiating the transaction. This is a great way to prevent fraud, but fraud alerts only work if the lender pays attention and takes steps to verify the identity of the applicant. (Let’s hope they do.) Fraud alerts normally expire after 90 days.
  2. However, in the case where your identity has already been stolen, the fraud alert will be set to last for seven years. This is called an extended alert. If you choose to place a fraud alert on your credit reports, be sure to ask for an extended alert. You only have to place a fraud alert with one of the three agencies and that agency will notify the other two, so the alert will apply to all three reports.
  3. Credit Monitoring: Your credit files are monitored by a third party – if activity occurs you are notified. There are many companies that provide this service, usually for a monthly fee, which varies widely. Keep in mind that credit monitoring does not prevent the fraud from occurring. The company that you engage to monitor your credit report, if this is your course of action, will only notify you when there is activity in your credit report. It could be real-time notification through an email or a phone call, but it may not be fast enough to prevent the account(s) from being opened in the first place. The credit monitoring companies advertise that they will help you resolve the situation if you have been a victim of identity theft and that is great service. But credit monitoring, by itself, does not prevent the fraud.
  4. Credit Freeze: A total lockdown of new account activity in your name and a proven way to protect against identity theft. Freezing prevents third parties from accessing your credit report, with some exceptions.

To explain, let’s take a hypothetical example. A crook obtains your social security number and other information about you and attempts to open a credit card account in your name. The credit card company will run a credit check on you (because your identity is being used) before the credit card is issued in your name, to the crook. If your credit report is frozen, the credit card company cannot get access to your credit report. If they can’t see your reports, they will not approve the credit card application. You might see that freezing your credit reports is a rock-solid way to prevent further fraud if you have been a victim of identity theft. Even if you have not been victimized, freezing your reports can be used to prevent fraud from occurring preemptively. You don’t have to be a victim of identity theft to freeze your credit reports, anyone can do it.

On September 21, 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act went into effect nationwide. The law makes it free to freeze your credit reports for residents of all 50 states. Previously, residents of some states were required to pay to freeze their reports.

If your credit report is frozen, you will not be able to have your credit checked for your own legitimate purposes, such as when you open a new credit card account or apply for a car loan. In this circumstance, you can temporarily lift the freeze with a PIN (personal identification number) that you will receive when you freeze it. You will receive four separate PINs, one for each of the four frozen credit reports. It is extremely important that you protect the PINs, but still have them handy when it comes time to lift the freezes. Without the PINs, it can be a gigantic hassle to lift the freezes, which could involve a lot of paperwork and documentation to prove your identity. The new law makes it free to lift credit report freezes.

Placing a security freeze on your credit won’t affect how you use your current credit accounts. Any credit cards or other accounts you currently have will continue to function as before. In my next post, I will talk about how to freeze a child’s credit report.