Equifax breach: fraud alert or credit freeze?

Industry recommendations encourage consumers to pursue a credit freeze with all reporting agencies to reduce risk of identity theft.

The recent Equifax data breach has potentially compromised personal information for 143 million people. As reported by Consumer Reports, the breach includes names, social security numbers, birth dates, addresses, and in some cases driver’s license numbers. In addition, approximately 209,000 consumers also had their credit card numbers compromised.

So what should consumers do? Credit experts are recommending that consumers freeze their credit with all three major credit bureaus (Equifax, Experian and Trans Union), as well as a lessor know bureau, Innovis. For more information on placing a credit freeze (including pros and cons) with each bureau, please visit the eXtension Financial Security for All resources.

What’s the difference between a fraud alert and credit freeze?

A fraud alert can make it harder for a thief to open more accounts in your name because a business must verify your identity before it issues credit, so they may try and contact you. Fraud alerts are free, stay active for 90 days and can be renewed once they expire. Visit the Federal Trade Commission for steps to place a fraud alert. Consumers also have the option to place an extended fraud alert, which lasts seven years.

A credit freeze, also known as a security freeze, restricts access to your credit report. This makes it more difficult for thieves to open new accounts in your name, because most creditors need to see your report before approving a new account. If potential creditors cannot see your credit report, they may not extend new credit. A credit freeze does not affect your credit score or prohibit you from obtaining your credit reports. In addition, it doesn’t prevent a thief from making charges to existing accounts, so it is important to still monitor all of your current accounts. The fee to place and remove a credit freeze, and the duration of the freeze all depend upon state law.

(Tip: If you have a credit monitoring service, placing a credit freeze may prohibit the service from being able to monitor your accounts. Consider speaking with your credit monitoring service before placing a credit freeze, to learn more.)

Equifax is offering free credit freezes until November 21, 2017. They will also refund anyone who paid for an Equifax credit freeze since September 7, 2017. However, please note that the other bureaus are not offering free credit freezes in response to the Equifax breach, so consumers will have to incur the cost of placing freezes (and removing them) with the other bureaus.

So why is placing a credit freeze with all four credit bureaus important? When a thief tries to take out new credit, a business can pull your credit report from any of the three major credit bureaus. If you have only placed a freeze with one bureau, for example Equifax, that protection will not help you with Experian and Trans Union.

Credit freezes are only free from the three major credit bureaus if you are a victim of identity theft (i.e. your personal information has been exposed and misused). Per the Federal Trade Commission, data breach victims are at a greater risk of having their information misused, but unless that occurs, you are not a victim of identity theft, and therefore not entitled to a free credit freeze from each of the main bureaus.

For additional money management resources visit Michigan State University Extension. MSU Extension offers financial literacy and homeownership workshops throughout the year to help you become financially healthy. For more information of classes in your area, please visit either the events page or MI Money Health website. Additionally, you can take the Financial Health Survey at MI Money Health to access if you’re financially healthy and discover more ways you can improve your financial health. 

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