Credit Freeze vs. Fraud Alert vs. Credit Monitoring: What’s the Difference?

Credit Freeze vs. Fraud Alert vs. Credit Monitoring: What’s the Difference?

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Whether you’ve been a victim or identity theft at some point, or you keep hearing about data breaches and you want to protect your credit, you may have thought about freezing your credit. A credit freeze is one of several options for protecting your information from identity thieves.

Here are three of the most popular ways to protect your credit data, and how they are different:

  • Credit Monitoring
  • Fraud Alert
  • Credit Freeze

It’s worth noting that none of these options impact your credit scores, so feel free to choose the one that is right for you.

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Credit Monitoring

Credit monitoring involves signing up for a service that allows you to review your credit reports and/or credit scores from one or more of the major credit reporting agencies. These services, which may be free or fee-based, will provide you with a summary of your credit report or your full credit report, and/or a credit score based on that information.

The advantage of using credit monitoring is that it’s quick and easy. It’s also free if you find the right source, like Nav. It also helps you stay on top of your credit, which is particularly useful for those who are building or rebuilding credit, or planning on a major credit transaction in the future such as getting a mortgage. 

The downside? It doesn’t stop someone from using your information to apply for credit in your name. If they do, you’ll need to report that identity theft as soon as possible to avoid further damage.

An important tip: when it comes to monitoring your credit, make sure you are tracking your information with all three major consumer credit reporting agencies: Equifax, Experian and TransUnion. They don’t share information with each other except as required by law, and if there’s a problem with one and you’re not monitoring it, you may not find out right away.

For business owners, credit monitoring is often the only option available for their business credit information. Currently, commercial credit reports can’t be frozen and there’s no formal procedure for placing a fraud alert on a business credit report. For that reason, small business owners should be checking and monitoring their business credit with all three major commercial credit reporting agencies: Dun & Bradstreet, Equifax and Experian.

Fraud Alert

When you place a fraud alert, companies that request your credit report will be alerted to the fact that you have identified possible fraudulent activity and will be told to contact you to verify your identity before extending credit.

When you place a fraud alert, you have three options:

  • A 1-year fraud alert
  • A 1-year active duty fraud alert (for members of the military on active duty)
  • A 7-year fraud alert

To file a 7-year fraud alert, you’ll need to supply the credit reporting agency with a valid ID fraud report you’ve filed with local, state or federal authorities.

It’s worth noting that if you place a fraud alert with one consumer credit reporting agency, that bureau must share that information with the other two major consumer reporting agencies. That means you don’t have to place a fraud alert with all three; the bureaus should take care of that for you.

Credit Freeze

A credit freeze “locks” your credit report so that, generally, companies you don’t already have a relationship with can’t access your credit report information. Note your credit reports can still be accessed by companies with which you have an existing relationship, for you to monitor your own credit through a credit monitoring service, for background checks, and in a few other limited situations.

Thanks to a new federal law that went into effect in September 2018, you can place a fraud alert on your consumer credit reports for free. It’s also free to lift a freeze.

In addition, parents of minor children can create and freeze a file on their children. If you are a guardian of an adult who is incapacitated, you should be able to freeze their credit reports as well.

Here’s how to contact the three major credit bureaus to place a credit freeze:

Experian

Equifax

TransUnion

You must place a credit freeze with each individual credit reporting agency. Unlike a fraud alert, a credit freeze does not extend to the other major credit bureaus.

While a credit freeze provides the most protection, it can also be something of a hassle at times. If you apply for credit, or even try to get a new cell phone or internet service, you’ll have to lift the freeze. If you can do that online, it should be fairly straightforward and quick, but if you can’t, the transaction you’re trying to complete may be held up while you try to thaw your file.

Must Do

If you do nothing else, monitor your credit reports with all three major credit reporting agencies. That will at least alert you to changes that could indicate fraud, such as an inquiry from a company where you’ve never applied for credit, or a change of address when you didn’t move. And if you’re a business owner, be sure to also monitor your business credit reports, ideally with all three major business credit bureaus.  Then, if you are a victim of fraud or you have reason to believe you need additional protection, you can consider a fraud alert or credit freeze.

Ready to see your credit data and start building better business credit? Check Your Personal and Business Credit For Free (No Credit Card Required).

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About the Author — Gerri serves as Education Director for Nav, which provides business owners with simple tools to build business credit and access to lending options based on their credit scores and needs. She develops educational programs and content for small business owners, and works on advocacy initiatives. A prolific writer, her articles have been featured on popular websites such as Yahoo!, MSN Money, ABCNews.com, CBSNews.com, NBCNews.com, Forbes, The Today Show website and many others.

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