In today’s digital world, your personal identity and ultimately your credit score are constantly at risk.There are two primary actions you can take to protect your credit – a fraud alert and a credit freeze.Both are easy to do online with the three nationwide credit bureaus – Equifax, Experian and TransUnion.We highly recommend that everyone consider taking one or both of these actions, depending on personal circumstances.
What is the difference between a fraud alert and a credit freeze?
If you believe your personal information has been compromised, you can place a fraud alert on your credit report. The process is easy and only requires a state-issued ID and a piece of mail as proof of your identity. When you place this alert with one credit bureau, they are responsible for informing the other two.
A fraud alert notifies all lenders who pull your credit that there may be someone impersonating you, trying to open credit accounts in your name. When a lender sees a fraud alert on your credit, they will request extra proof of the borrower’s identity.A fraud alert expires after one year but can be extended.
A fraud alert may be sufficient, especially if you intend to take out loans in the near future and need your credit to be accessible.However, to be sure you will not experience identity theft, or if you have proof it has already occurred, you should freeze your credit.
When you freeze your credit, you must notify all three credit bureaus separately. This process can be done online on each credit bureau’s website, over the phone, or by mail.
A credit freeze prevents lenders from viewing your credit report. Consequently, it prevents anyone from taking out credit in your name...including you. To take on new debt when your credit is frozen, you must unfreeze your credit.This is quick and easy to do if you used the online method but can take longer if you use phone or mail to set up the freeze in the first place.
Contact information for the three major credit bureaus is as follows:
Equifax Security Freeze, P.O. Box 105788, Atlanta, GA 30348
Experian Security Freeze, P.O. Box 9554, Allen, TX 75013
TransUnion LLC, P.O. Box 2000, Chester, PA 19016
Freezing your credit: What to expect
If you decide that freezing your credit is the right choice for you, here are some things you should know:
- Freezing your credit is free.
- You will need to provide proof of your identity in the form of your SSN, a photo ID, and a proof of residence such as a utility bill addressed to you.
- You will be asked personal security questions based on information available within your credit report, including past addresses, phone numbers or credit accounts.
- You will receive a PIN you can use to unfreeze or re-freeze your credit in the future.You MUST keep this PIN to do this easily.
- Your credit freeze will be active immediately if you file online, or up to three business days if requested by phone.
- Freezing your credit does not hurt your credit score and you can still use your existing credit cards and lines of credit while your credit is frozen.
While freezing your credit can be an excellent way to protect yourself, it is not foolproof. Criminals can still use your credit cards to make fraudulent purchases and leverage your SSN to impersonate you on tax returns and health insurance documents.
That is why it’s important to cover all of your bases. This may include signing up for a credit monitoring service that will keep you up to date on any changes to your credit that may signify fraudulent activity. This is particularly beneficial for individuals and businesses with significant financial activity that puts them at greater risk.
You can freeze your child’s credit too
You must be 18 or older to create an online account with the three credit bureaus, so it is wise to work with your children to freeze their credit as soon as they turn 18.Otherwise, their credit could remain exposed for several years before they reach life milestones such as buying a house and taking out a mortgage.
Because identify theft can also happen to minors, you may want to freeze your child’s credit before they turn 18.The process for minors must be done by mail since the credit bureaus must first create a file for your child. In addition to supplying the standard documentation, you must also provide your child’s birth certificate and proof that you have the authority to act on their behalf.
At Simplify Wealth, we believe in taking proactive steps to optimize financial well-being. If you don’t know where to start, we can help.