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When to Monitor, Freeze, or Put an Alert on Your Credit

Get the scoop about what to do when you find out that your personal data has been compromised. 

By
Laura Adams, MBA,
September 16, 2015
Episode #418

Page 1 of 3

When to Monitor, Freeze, or Put an Alert on Your CreditScott B. said, “After being notified by a company that my personal information was stolen from them, I put a freeze on my credit so no new accounts could be opened in my name. But how will that affect my credit score?”

I'll tell you what to do when you find out that your personal data has been compromised. We’ll cover the differences between a security fraud alert and a credit freeze, how they affect your credit, and the pros and cons of using a credit monitoring service.

Free Resource: Laura's Recommended Tools—over 40 of the best ways to earn more, save more, and accomplish more with your money!

What Is Identity Fraud?

Did you know that someone becomes a fraud victim in the U.S. every 2 seconds! A criminal only needs a few data points, such as your name, Social Security number, or credit card number, to steal from you.

Here some of the most common types of identity fraud that occurred in 2014:

  • Filing a bogus government document in your name before you do, in order to get a tax refund or benefit. This rip-off makes up 40% of identity crimes. You can learn more in The Tax Refund Scam, an exposé of south Florida criminals by the news show 60 Minutes.
  • Using your existing credit card to make purchases or to open up a new account in your name (17%).
  • Using your information to open utility accounts, such as cable television, internet, electricity, or phone service and then never pay the bills (13%).
  • Bank fraud, which includes stealing from your checking, savings, or other deposit accounts (4%). 
  • Using your information to get a new loan, such as a mortgage, personal loan, or car loan (4%).

What Is a Security Fraud Alert on Your Credit Report?

So what should you do if you’re like Scott and find out that your personal information has been stolen, either physically or as part of a large corporate breach?

In some cases, the company that experienced the breach will give you a complimentary membership to a credit monitoring service. I’ll tell you more about those in a moment.

The first step you can take when you think or know your personal information has been leaked is to set up a security fraud alert on your credit reports. This is a red flag that notifies creditors and merchants to take special precautions to make sure they’re giving credit to the right person.

There are two types of fraud alerts:

  • Initial fraud alert—gives you protection for 90 days if you believe that your identity could be in jeopardy. This makes it more difficult for a thief to open a new credit account in your name. You can renew a fraud alert every 90 days for as long as you like.
  • Extended fraud alert—gives you protection for up to 7 years if you’ve been the victim of identity theft. You must have documentation to prove it, such as a report filed with a federal, state, or local law enforcement agency.

Adding either type of fraud alert to your credit file is free and doesn’t hurt your credit scores in any way. However, if you need credit, having a fraud alert can slow down the application process.

However, if your personal information has been breached or you’ve been the victim of identity theft, having this delay is well worth the inconvenience.

When you place a fraud alert with any one of the three major credit bureaus (Experian, Equifax, and TransUnion), they must notify the other 2 on your behalf so alerts can be placed on those files as well.

When fraud alerts are placed, the credit bureaus 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.

See also: Best Tips to Improve Your Credit Score

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