I have had multiple conversations recently with people who have had their identities stolen in one way or another. In each of the cases the person was already working to resolve the issue through the proper channels, but I was surprised by advice one person received from one of the major credit agencies. They were told NOT to put a freeze on their credit because it’s a “really big hassle.” So I wanted to write a post about how to get your credit cleared up, how to monitor your credit, and the best step to prevent credit from being opened in your name (hint: freezing your credit is NOT a big hassle).
First the basics. The U.S. Government passed an amendment to the Fair and Accurate Credit Transactions Act in 2003 that established the right of every citizen to check each of the big three credit bureaus for their personal credit report once per year for FREE. To accommodate this they built the site AnnualCreditReport.com (super sketchy, I know, but it is legit). This is NOT FreeCreditReport.com (which is now owned by Experian, and only gives access to their reports). A best practice here is to check one of the three reports every 4 months. That way you are checking your credit for free 3 times a year and can spot any funny business relatively early. If you want to know how to read the gibberish on the report check out my previous blog post.
A more real-time way to keep an eye on your credit is to hire a credit monitoring agency. CreditSesame.com is free (with ads) and can help you keep an eye on anything happening to adversely impact your credit by watching your credit score in real-time. Paid credit monitoring will actually review your credit report for new addresses and new accounts and email you when they are added to make sure you were the one to make the change.
LifeLock is the main company that everyone knows, but each of the big three credit agencies also sell this service. If you decide to go the paid route, make sure to go with a company that will help you correct your credit after a case of identity theft, and will help you recover any money you lost because of a breach to one of your existing accounts.
Paid monitoring is a nice service, and may be necessary in today’s world, but it only tells you things that have already happened. A credit freeze on the other hand prevents your credit from being used to open new accounts. The tricky part is that a credit freeze works by not allowing anyone access to your credit to review your report, except yourself. Which means if you want a new credit card you will have to temporarily lift the freeze, or add an exception for the creditor so that they may evaluate it before opening an account. You will need to do this for each of the three credit agencies, for each person, and be prepared for the agency to try to talk you out of it. Why? Remember: the credit bureaus sell credit monitoring for a monthly fee.
Experian suggests that a credit freeze is “an extreme step that often proves more inconvenient than protective” and suggests that you use an initial security alert instead. I have a major problem with that statement.
First, yes it is a little inconvenient that you have to remember to allow access to your report when you want to open new credit. However most Americans aren’t trying to open new credit accounts on a regular basis. And proving that an account does not belong to you after it is opened costs months of time and often thousands of dollars.
Second, freezing your credit costs $10 and usually takes 15 minutes for it to be turned on or off. (Recent changes to Dodd-Frank require the freezes to be free starting September 21, 2018, no telling what this will do to the time it takes to go into effect). Between the two I’d rather take the credit freezing over the fraudulent accounts. An Initial Security Alert, or “Fraud Alert” can indeed be helpful because the bureau will ask you before allowing access to your report to a third party. However, the alert only stays on your account for 90 days, so you would have to file a new one four times a year in order to keep it on your account at all times.
Credit Freezes aren’t the end-all be-all of identity theft protection. You still need to protect accounts you have, and a credit freeze doesn’t prevent your SSN from being used for employment or on a fraudulent tax return. So you still need to take steps to protect your identity and thereby, protect your credit. Three basic steps are to create strong passwords and regularly change them, refuse to give your information to someone unless you are 100% certain they HAVE to have it, and watch your accounts for suspicious activity.