Wednesday, June 13, 2007

Protecting Your Credit Files with Fraud Alerts and Freezes

This might have happened to you. A form letter arrives in the mail, telling you that your personal information in a retail chain's database, a government agency's computer system, or another large organization's records, may have been stolen. Or, for some other reason, you think your Social Security number may have fallen into the hands of the wrong people. All of a sudden, you're at risk for identity theft. The following steps might protect you.

1. Fraud Alert. You can contact the fraud departments of the three credit reporting agencies--TransUnion, Equifax and Experian--and have a fraud alert attached to your files. A fraud alert lasts for 90 days. You should get a mail confirmation of your alert within a week or so (if you don't, contact them again and make sure they got the message). You can get a 7-year fraud alert if you can provide proof that you've actually been the victim of identity theft.

If a crookster tries to open an account in your name with a potential creditor, the credit reporting agency will send the fraud alert along with your credit history to the potential creditor. The potential creditor should contact you by phone before opening the account, to verify that it's really you that wants the account.

However, potential creditors receiving fraud alerts don't always contact you; some may just open an account. Also, even though the first credit reporting agency you contact should tell the other two about your alert, you can't absolutely count on that happening. So you should contact all three credit reporting agencies yourself. Even though fraud alerts are imperfect protection at best, they are a first step you should take.

2. Get Your Credit History with a Fraud Alert. When you place a fraud alert on your files, you should get a copy of your credit report to see if anyone has tried to open an account in your name. You're entitled to a free copy with a fraud alert (this is in addition to the free copy you can get every 12 months). Get your credit report and review it carefully. If there are any fraudulent accounts, notify the credit reporting agencies and the creditors pronto.

You may want to check your credit reports every few months thereafter, even if you have to pay for them. The cost of credit reports is low compared to the aggravation of dealing with debts that thieves have run up in your name.

3. Freeze Your Credit File. You can now "freeze" your credit files if you are a resident of some 35 states or the District of Columbia. A freeze means that potential creditors can't get your credit file without having your explicit authorization. So, a fraudster can't open an account in your name without you learning about it. A freeze is much stronger protection than a fraud alert. It doesn't prevent your current creditors from getting access to your files, nor would it prevent government agencies from getting access in connection with their official responsibilities. However, by preventing the opening of new accounts without your authorization, it gives you a chance to prevent the theft of your identity.

For a list of the states that give their residents the right to freeze their credit files, go to This website is run by the nonprofit Consumers Union and will give you information about each state's laws and how you'd place a freeze on your files. At least for now, you have to send written letters by certified mail, but that's not much aggravation compared to unraveling the mess created by identity theft. Also, freezing or unfreezing an account may cost you a small amount of money. But identity theft can be far worse, so don't be pennywise and pound foolish.

A security freeze on your credit files will slow things down when you want to legitimately obtain credit yourself. It can take a few days to lift a freeze. That could make the process of say, securing a mortgage, more of a pain. But talk to someone who's been the victim of identity theft if you want to learn about pain (they have months of it, maybe years). Millions of people have been the victims of identity theft. It's a very common crime, and the perpetrators are often based in foreign nations. So the potential for arrest and prosecution aren't very strong deterrents. Unless you need to apply for credit an awful lot of the time, a freeze on your credit files will not be much of a problem, and may be the best protection you have against identity theft.

4. Were Your Existing Accounts Compromised? If the loss of your personal information may have included information about any of your existing accounts (bank, credit card, department store, etc.), contact the creditors right away. Ask them to close the accounts and open new ones for you. Also ask them to look for bogus charges. That might help detect and identify the crooks.

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