Breach of data is a daily occurrence. Hackers are finding more ways to steal information from businesses that have personal data on file, such as hospitals, business schools, energy providers, etc.
Regularly reviewing your credit report each month to make sure thieves haven’t opened accounts in your name is a good way to protect your personal information as well as your credit rating. You should also check your bank, credit, and other financial statements each month for unauthorized charges.
What could help the most are three tools that are common in the credit world but not so common among consumers: fraud alerts, security freezes, and credit locks. How these tools work is as follows:
You can place a free alert with one of the three major credit reporting bureaus, Equifax, Experian, or TransUnion. The alert will be forwarded to the other two bureaus once it is placed with one.
A fraud alert indicates to prospective lenders that you have been the victim of identity theft. Before granting credit to someone claiming to be you, lenders should take extra measures to verify your identity. A bank, for example, may verify your identity before approving your new credit in one of several ways.
Fraud alerts are valid for 90 days. After the first alert expires, another 90 days may be added to it. You can also extend it by seven years if you have been the victim of identity theft.
If you renew the alert every 90 days, you will be able to get a free credit report from each credit bureau. Additionally, you can obtain a free credit report each year from each credit reporting agency.
Credit freezes, also called security freezes, are an extra step beyond a fraud alert that can provide additional protection. Even though most states require it to be free for ID theft victims, it can still cost $2 to $12 to start, lift, or remove a credit freeze.
Credit freezes do exactly what their name implies – they prevent anyone from opening a new account or getting new credit in the name of the person whose credit file is frozen. This is more severe than a fraud alert. You may want to freeze your credit if you believe your information or credit cards have been stolen and you’re at risk of fraud. It blocks most lenders from seeing your credit history and can be the most effective way to protect against fraud.
However, that protection comes at a cost. The system also shuts out companies that may want to do business with you, such as lenders, insurers, and cellular service providers that may want to check your credit report before doing business with you. When you have an active credit freeze, you can get around that by temporarily lifting the freeze with a PIN and setting a date when the freeze will be reinstated automatically.
Even with a freeze on your credit report, banks with which you already have accounts can still check your credit report, as can collection agencies and certain government agencies.
In some states, a credit freeze is free, depending on your situation and where you live. A credit freeze may be provided to identity theft victims who file a police report.
In the alternative, you may have to pay $2 to $12 for each credit bureau to lift the security freeze. To access information about the freeze, you may also have to pay for a replacement PIN.
It is important to be aware that freezing your credit report may delay the approval of new credit since creditors will not be able to see your credit report. You may want to wait until after your loan has been approved before freezing your credit if you are shopping for a loan soon. A fraud alert may be a better option until then.
Credit locks are similar to credit freezes and should be easier to use. It is provided by a credit reporting agency and allows users to lock and unlock their accounts online without verifying their identity each time a lift or security freeze is performed.
Credit locks usually require an annual fee of $60 or more. Credit locks last as long as you pay the annual fee.
A credit lock only works for the credit reporting company that you start it with, requiring you to lock your information with all of them if you want all of your credit information to be protected.
According to Equifax, consumers can name specific companies that can access their credit reports. Therefore, if you apply for an auto loan through Wells Fargo, for instance, you can authorize Wells Fargo to access your Equifax credit report through a credit lock.
Where to Start?
If you’re not sure where to start, a fraud alert is the best first step to preventing ID theft. Fraud alerts are free.
Several methods can be used simultaneously. Set up a credit freeze or credit lock if you believe your risk of ID theft is high. Although a credit lock may be easier to set up, it can ultimately cost more than a credit freeze.
Is your personal information on the dark web? Make sure your identity isn’t at risk!