Placing an alert or a freeze on your record with credit bureaus can help prevent fraudulent activity from damaging your credit score.
A freeze cuts off access to your credit reports unless and until you lift the freeze with a password-protected credit bureau account or a PIN. A fraud alert requires that creditors verify your identity.
Credit freezes and fraud alerts are free — but the freeze offers better protection.
Fraud alerts expire after a year unless you extend them, while freezes last until you lift them.
The credit freeze
What it is: A credit freeze, sometimes called a security freeze, prevents lenders from accessing your credit report at all without authorization. Credit card issuers and lenders usually want to see your credit history before approving you for a credit card or loan, so they are unlikely to issue new credit —to you or someone pretending to be you — until you authorize them to access your credit report.
You can unfreeze your credit, allowing lenders see your credit report, if you want to open a new account. This might also be necessary if you’re renting an apartment or applying for insurance, both of which usually require a credit check.
How to set it up: You’ll have to contact each credit bureau separately. The freeze will stay in place until you lift or “thaw” it.
When you need it: A credit freeze is a good idea for consumers willing to deal with thawing and refreezing when they want to give a creditor access to their credit reports. It is the best protection available. NerdWallet recommends it for most consumers. As long as you have your password or PIN, your credit report can be unfrozen in minutes.
Note: The credit bureaus also offer a similarly named “credit lock” product, sometimes for a fee. It may be simpler to unlock a credit lock than to lift a credit freeze, but the freeze may offer more legal protections.
The fraud alert
What it is: A fraud alert is a warning placed on your credit record that tells potential lenders to contact you and verify your identity before extending new credit. If someone tries to open a new credit card or borrow money in your name, a phone call from the lender will tip you off, and you can prevent the new account from being opened.
How to set it up: Contact one of the three credit reporting bureaus — Experian, Equifax or TransUnion — and ask it to place a fraud alert on your credit file. The bureau you choose is required to notify the other two.
When you need it: NerdWallet recommends fraud alerts to any consumer who does not want a credit freeze or lock. If your personal information has been exposed — and with the number of data breaches that have occurred, there’s a good chance it has — placing a fraud alert may let you know if someone is trying to use your information to open new accounts.
You can have both
You can add a fraud alert on top of a freeze. Credit expert John Ulzheimer says it’s a little like putting a safe inside a safe, but he does it.
However, no freeze or fraud alert can spot or stop fraudulent charges on an existing credit card account. It’s up to you to check carefully for any charges you did not authorize, by reviewing statements or setting up alerts when charges are made.
If you discover a problem, act quickly to dispute fraudulent charges in order to limit your liability.