Do You Know the Difference Between a Fraud Alert and a Credit Freeze?

21 January 2016

Some identity theft victims find out after noticing certain activity on their credit reports. Others get a letter in the mail informing them their personal data may have been leaked in a corporate data breach. Still others don’t know until their credit card is denied at a cash machine. No matter how they learn their information may have been compromised, credit fraud victims often have the same question: “What do I do next?”

When fraudsters get ahold of their victims’ financial data they often look to open new lines of credit, leveraging their victims’ clean borrowing histories to apply for loans or new credit cards in their names. To protect their credit accounts from unauthorized access, Canadians who believe their data may have gotten into the wrong hands have two major options: initiating a fraud alert or a credit freeze.

Although many Canadians have heard these terms before, they are all too often confused with one another. While both actions can restrict ID thieves from accessing compromised credit accounts, they work differently and are best used in different situations.

A fraud alert, or credit alert, is a relatively quick and easy first step for consumers who worry they may be the victim of ID theft. After losing a wallet or otherwise fearing their information may have become compromised, consumers can simply call one of the credit bureaus in Canada (each is required to notify the other) and request an alert be set on their accounts. Then, when lenders or service providers review consumers’ files in response to credit requests for the next 90 days, they are met with a note asking them to take extra precautions before approving the request. Typically, this can be as simple as contacting consumers directly to confirm that they placed the request, not an identity thief.

While credit alerts are a useful proactive measure, they are not quite as secure as credit freezes. A credit freeze, also known as a security freeze, provides stronger fraud protection and is intended for previous victims of identity theft who are likely to be targeted again. When consumers request a security freeze, they effectively place their credit file under lock and key. This stops fraudsters from opening new lines of credit because legitimate lenders will not accept requests without first viewing an applicant’s credit report. Then, whenever consumers need to grant a company access to their file, they must provide the credit bureau with an access code to “thaw” their account. Unlike credit alerts, which can typically be placed for no charge, consumers can incur a fee each time they freeze and thaw their account.

As helpful as fraud alerts and security freezes can be in protecting consumers from credit fraud, they only prove their value once activated. By signing up for a credit monitoring service, you can receive notifications about certain activity on your credit file that may indicate fraud, giving you the heads up that you need to place an alert or a freeze on your account. To learn more, contact Identity Guard Canada today!