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Credit freeze vs fraud alert

Posted by Jill Boynton  November 10, 2009 10:09 AM

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“I’m concerned about identity theft. Should I issue a credit freeze or a fraud alert to protect myself?”

A fraud alert is a message attached to your credit report, asking potential lenders to verify your identification before they issue a new loan or other credit in your name. So if you are in the department store and want to sign up instantly for a credit card the store will have to wait while the credit bureau calls you to verify that it is indeed you that is applying for the new card (so you better have your cell phone on.) You set up a fraud alert by calling each of the 3 credit bureaus – Experian, Trans Union and Equifax. The alert expires every 90 days and has to be resubmitted. The problem is that lenders are not required to call you even though you have requested it. They can ignore the message. One of the benefits of the alert is that your name will be removed from pre-approved credit card and insurance offers for 2 years.

A credit freeze is a way for you to prevent your credit report from being accessed by anybody without your consent. Without access to your credit report it is unlikely that a potential thief could open a credit card or take out a loan in your name. If you decide to apply for credit you will have to call and have the freeze lifted so that the lender can see your report. That could delay or interfere with the timely approval of a credit request. To freeze your report you must contact each of the 3 credit bureaus, and there is a fee of up to $10 for each freeze and unfreeze. So while this method provides better protection from identity theft than the fraud alert it also is more cumbersome and expensive. It also doesn’t apply to credit requests from existing account relationships.

If you are very concerned about your identity then a credit freeze is the better method of theft prevention. But you don’t necessarily need to use either of these methods to keep a watchful eye on your identity. In general it is recommended that you get a free credit report from each of the 3 bureaus once a year. You can request it from one of the bureaus every 4 months. Also log into your checking account and credit card accounts on line once a week and check activity. These measures will help you catch any suspicious activity and stop it quickly.

This blog is not written or edited by Boston.com or the Boston Globe.
The author is solely responsible for the content.

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Local finance professionals share insights and advice on issues such as budgeting, managing debt, and retirement planning.

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D. Abraham Ringer is a CERTIFIED FINANCIAL PLANNER practitioner and a Financial Adviser with Morgan Stanley Global Wealth Management in Boston. He is registered in MA, NH, NY and several other states to which his articles are directed. For more information please visit www.morganstanleyfa.com/ringer
Financial Planning Association™ of Massachusetts has 900 members who specialize in the financial planning process. Many of its members engage in philanthropic pro bono work in their communities, recommend legislation, elevate public awareness, promote financial literacy, and advocate for sound economic and tax policies.
Odysseas Papadimitriou is the founder of CardHub.com, a credit card and gift card marketplace, and WalletHub.com, a personal finance site. He has more than 13 years of experience in the personal finance industry, and previously served as senior director at Capital One.

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