Prevent ID Theft: 8 Tips on Credit Freezes, Locks, and Alerts
Identity theft is a growing problem, but there are ways to fight back. Laura covers eight tips for using a credit freeze, credit lock, or a fraud alert to block fraudsters from wreaking havoc in your financial life—plus, warning signs to watch for.
Laura Adams, MBA
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Prevent ID Theft: 8 Tips on Credit Freezes, Locks, and Alerts
Every year, more people become victims of identity theft, which can cost money and time to resolve. A study by Javelin Strategy & Research found that 16.7 million Americans were victims in 2017. That’s an 8% increase from the prior year and a record high.
If you worry about becoming an ID theft victim, there are ways to fight back. The nationwide credit reporting agencies—Experian, Equifax, and TransUnion—give consumers several options for restricting access to their credit data.
I’ll cover eight tips you need to know before getting a credit freeze, credit lock, or a fraud alert. Plus, you’ll learn the warning signs of identity theft so you can act quickly to block fraudsters from wreaking havoc in your financial life.
8 Tips for Getting a Credit Freeze, Lock, or Alert to Prevent ID Theft
- Placing a credit freeze is now free.
- Freezing your credit never hurts your scores.
- You need three freezes for full protection.
- Frozen credit reports can still be accessed.
- Thawing your credit may take time.
- Credit locks are more convenient than freezes.
- Credit locks typically come with a fee.
- Fraud alerts now last longer.
Before we cover more detail on each of these credit tips, here’s a quick review of what identity theft is and why thieves are after your personal data.
Why Thieves Want Your Personal Information
Here are some of the most common types of identity crime that occurred in 2017:
- Credit card fraud is the most common type of theft, which happens when a criminal uses stolen credit card information to make fraudulent purchases.
- Imposter scams are when a criminal pretends to be someone you know on email, social media, or by telephone in order to get your identifying information.
- Mail identity theft has been around a long time and it happens when someone steals your mail or changes your mailing address in an attempt to get your sensitive information.
- Medical identity theft happens when someone steals your insurance or personal information to obtain medical goods or services.
- Mortgage fraud occurs when parties involved in a home loan—such as a borrower, mortgage broker, or a real estate appraiser—give fraudulent information to get approved.
- Synthetic identity theft occurs when a criminal uses a combination of real and made up information to create a fake identity and apply for new credit or utility accounts and then never pay the bills.
- Tax identity theft is when a criminal submits a bogus tax return in your name before you do, in order to get a tax refund or government benefits.
- W-2 scams occur when a human resources administrator gets tricked into revealing sensitive payroll data.
Criminals only need a few data points, such as your name, address, Social Security number, or credit card number, to steal from you. Once they have your identifying information, they could empty your bank account, rack up charges on your credit cards, get a cell phone in your name, or even pretend to be you if they get arrested. Use these eight tips to shore up your security:
1. Placing a credit freeze is now free
While there’s no foolproof method to stay safe from ID theft, freezing your credit is the most effective way to prevent criminals from opening new credit accounts in your name. A credit freeze, also known as a security freeze, prevents a credit agency from releasing your information to anyone without your consent (with some exceptions that I’ll cover in a moment) until you unfreeze your file using a personal identification number (PIN).
A credit freeze protects you because lenders insist on reviewing your credit before approving you. If no one can access your credit, that shuts down bogus requests from thieves and cybercriminals.
While freezing and unfreezing your credit used to come with fees in many states, it’s now free due to the Economic Growth, Regulatory Relief, and Consumer Protection Act, a federal law which went into effect September 21, 2018. The credit reporting agencies must also make it convenient for consumers to request and lift freezes online.
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For car insurance:
- Buy a used car
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For health insurance:
- Visit the federal health insurance marketplace to see whether you qualify for any discounts or assistance.
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2. Freezing your credit never hurts your scores.
Freezing your credit doesn’t affect your existing credit accounts or your credit scores in any way. It just makes it more difficult for an identity thief to open new accounts in your name.
Also note that if you have children under age 16 or you have other dependents with credit files, you can also place free freezes on their behalf.
3. You need three freezes for full protection.
To be fully protected, you must place a freeze on your report at each of the three nationwide agencies: Experian, Equifax, and TransUnion
While a freeze can prevent a thief from opening a new account in your name, it can’t prevent fraud on your existing accounts. For example, a criminal could use your credit card number to make charges or your health insurance data to get medical goods or services. So, you still need to stay vigilant for any warning signs of identity theft.
4. Frozen credit reports can still be accessed.
One downside to a credit freeze is that certain companies can still access your credit reports, including:
- Creditors you already have a relationship with
- Cell phone and utility companies
- Credit monitoring services
- Potential employers or landlords that you authorize
- Government agencies following a court order
- Debt collection agencies
- Companies that prescreen for credit and insurance offers using a soft credit inquiry (which does not affect your credit scores)
However, if you don’t want to receive any unsolicited prescreened offers, you can opt-out at optoutprescreen.com or by calling 1-888-5-OPT-OUT (1-888-567-8688).
5. Thawing your credit may take time.
Once a credit freeze is in place, remember that you won’t be able to get any type of product or service that requires a legitimate review of your credit—such as a loan, insurance, or professional licenses—without unfreezing it ahead of time.
To thaw out your credit, you’ll also need to visit each credit agency website and have each of your PINs handy, which is a bit of a hassle.
To thaw out your credit, you’ll also need to visit each credit agency website and have each of your PINs handy, which is a bit of a hassle. Lifting a freeze online shouldn’t take more than an hour or two.
But if you lose your PINs or the credit agencies can’t verify your identity based on the information you provide, unfreezing your file can take much longer. The credit agencies may require you to mail in supporting documentation (such as a copy of your driver’s license or utility bills) before they make changes to your credit files.
6. Credit locks are more convenient than freezes.
Like a freeze, a credit lock doesn’t hurt your credit. It restricts access to your credit files so no one, including you, can open a new credit account before unlocking them. You’ll also need to place locks with each of the three credit reporting agencies for full protection.
But a lock is different than a freeze because you don’t need PINs to unlock your credit files, so it’s much more convenient. You can even create a lock or unlock using a smartphone app. Plus, there typically is no waiting period for a lock or unlock to take effect.
7. Credit locks typically come with a fee.
The downside of having a credit lock is that it generally comes with a fee. Plus, your credit file can still be accessed for the same reasons as a freeze, which I previously reviewed.
Credit agencies charge about $20 per month to maintain your lock service, which may include daily alerts, dark web monitoring, and free credit reports. However, Equifax has been offering a free credit lock in the wake of its massive data breach that occurred in 2017.
The price and rules for locks can change over time because they’re products created by credit agencies. In contrast, the rules for a credit freeze have been established by federal law.
8. Fraud alerts now last for a year.
If you don’t want the cost of a credit lock or the hassle of a freeze, there’s a third protection option that won’t harm your credit, called a fraud alert. An alert tells creditors that they need to take extra steps to verify your identity before approving you for a new credit account.
Alerts used to expire after 90 days (unless renewed) but the new law extends them for one year. And if you’ve been an identity theft victim, you can extend them for seven years.
In addition to being free, another benefit of a fraud alert is that you only need to contact one credit agency because they must notify the other two on your behalf so alerts can also be placed on those files. Plus, the agencies remove your name from their pre-screened offers lists. That means you’ll stop receiving pre-approved offers from lenders, credit cards, and insurance companies while a fraud alert is active.
The downside to placing a fraud alert is that it slows down the application process when you do need credit. However, if your personal information has been breached, having this delay is well worth the inconvenience.
Which Identity Theft Credit Protection Option Is Best?
Which type of protection is best for you depends on your finances. If you know or suspect that you’re a victim of identity theft, you should take the most defensive approach and freeze your credit.
But for most people, your best defense against identity theft is simple: carefully monitor your credit reports and account statements for any unauthorized activity. Here are some warnings signs to watch for:
- New accounts on your credit report that aren’t yours
- Bank account withdrawals that you don’t recognize
- Bills received at your address with someone else’s name or missing mail
- Hard inquiries on your credit report from companies you don’t recognize
- Notification from a business saying that you could be a data breach victim
- Calls from debt collectors about past due amounts that aren’t yours
- Medical bills for services you didn’t use or a claim rejection from health insurer
- Notification that more than one tax return was filed in your name
As I mentioned, a credit freeze or lock can prevent someone from opening up a new credit account in your name, such as a credit card or car loan. But it can’t prevent someone from using your identity for something unrelated to credit.
For instance, it won’t keep a determined criminal from filing a bogus tax return, getting a driver’s license, or making a false medical insurance claim in your name. Those transactions have nothing to do with your credit report.
Someone could steal your physical credit or debit card or just a card number and make unauthorized purchases. No freeze, lock, or alert would tell you if this occurred because individual purchases don’t impact your credit report.
It’s up to you to check your credit card and bank statements to watch for fraudulent activity. Fortunately, your liability for misuse on a credit card is very small. However, damage from debit card fraud could be huge, depending on when you report it. To keep your finances safe, protect your confidential information, pay attention to signs of fraud, and act on any red flags as quickly as possible.
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About the Author
Laura Adams received an MBA from the University of Florida. She’s an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura’s previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.