Credit Monitoring vs. Fraud Alerts vs. Credit Freezes

February 25, 2008

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The array of options for identity theft protection can be quite confusing. Credit monitoring, fraud alerts and credit freezes are 3 tools that are used to fight identity theft. What is the difference between them? Which is better?

Credit Monitoring

Credit monitoring is the most common way to protect against identity theft. Up until recently, it was really the only game in town.

Monitoring will let you know what has happened- if there was a new account, a credit inquiry, changes, etc.

You can probably already see the problem with credit monitoring- it tells you what has happened after the fact. It does not actually prevent identity theft from occurring.

Fraud Alert

A fraud alert is something that credit bureaus put on your credit report. When someone tries to apply for credit in your name (for example a credit card), the potential lender is supposed to contact you to verify that this is legit. If after taking “reasonable” measures they still can’t contact you, the credit should not be granted. Lenders can still do inquries against your credit report

There are two types of fraud alerts:

• Initial fraud alert - Good for 90 days but can be renewed.
• Extended fraud alert - Only available to people who had had their identity stolen (usually requires a police report). Active for seven years

One issue with fraud alerts is that even though potential creditors are supposed to contact you, sometimes they don’t do it. Despite what many people think, they are not required by law to do it; only to have “reasonable policies and procedures”.

Credit Freeze

A credit freeze will prevent new lenders from being able to access your credit report at all. Many states require credit bureaus to offer credit freezes but the three main reporting agencies (Experian, Equifax, TransUnion) make it available in all 50 states.

When you want to apply for credit, you request that the bureau lifts the freeze, then the creditor can access the report, and then you ask that the freeze be reenabled.

In most states there is a fee to initiate a freeze, and other fees to lift and re-instate it. In some states there are no fees if you have been an identity theft victim.

Generally, the agencies are given 3 days to lift a credit freeze, which might prevent you from getting instant credit or making impulse purchases.

Which One is Best?

You don’t have to pick just one - if you are worried about identity theft, you can do them all. Contact the three main credit agencies and request that they be set up, or use an Identity Protection Service like LifeLock or TrustedID to do it for you.

Do you have any of these set up on your credit report? How are they working for you? Do you find the credit freeze a pain?

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Posted in Credit Freeze, Credit Monitoring, Fraud Alert, Identity Theft