Credit protection: Freeze, lock, fraud alerts, what's best?

When Equifax announced a massive data breach last summer, many Americans were rightly concerned about their credit. Thieves had broken into the credit-reporting giant’s database and had access to at least 143 million records for several weeks over the summer, making off with vital information that could potentially be sold on the black market and used to commit identity theft. Initial reports indicated about 1.29 million Mississippians may be potential victims. You need credit protection.

The breach was a disaster of unparalleled scale for Equifax and the credit-reporting industry. It eventually cost Equifax its CEO, and the company even now is having to explain itself to Congress and the nation. The inevitable flurry of lawsuits has followed, including a rare 50-state, class action lawsuit.

In the wake of the disaster, most financial experts advised us to be aggressive in how we protect ourselves and our information. The most common advice was to place a “credit freeze” on your account at all three major credit bureaus, to prevent thieves from opening new credit accounts. Other options included credit locks, or fraud alerts. But many people remain confused about the differences among the options, so I’ve found some sources of information to help explain the differences.

 Credit freezes and credit locks are similar in many ways. Both keep your credit file off-limits to creditors trying to open new accounts. Both can be easily removed, although there are differences in how that occurs. The key differences, according to most sources I checked, are that unfreezing (“thawing”) your credit file may take a bit longer, locks may cost more, and you may be giving up some of your rights to join class action lawsuits if you put a lock in place.

A freeze is generally considered to be a stronger measure, to be taken in cases where you know your credit has been compromised. A lock might be used if you’re just concerned about the possibility of identity theft in general. A third option, a fraud alert, lets you know when new credit accounts are opened, so you can act immediately.

Both freezes and locks may cost you. Although there has been tremendous pressure from regulatory agencies and lawmakers to force credit bureaus to freeze your credit for free, only Equifax has so far done so (and only through Jan. 31). The financial website Nerdwallet’s Amrita Jayakumar notes that, at TransUnion and Experian, you will still be expected to pay about $10. For a lock, Equifax currently charges a $4.95 monthly fee to maintain the lock, but a free “lifetime” lock is expected in January. TransUnion provides locks for free, while Experian charges a $4.99 for the first month, and $24.99 monthly thereafter.

When it comes to removing the protection, the advantage may go to credit locks. Both locks and freezes may be removed fairly easily, but removing a freeze can take 24 to 48 hours to take effect. By contrast, a lock (with TransUnion or Experian, not Equifax) can be removed instantly by simply swiping an app on your smartphone. This is important, for example, for people who want to apply for credit at the store cash register to take advantage of discounts.

Consumer Reports, in a September comparison between locks and freezes, said freezes were in general a better option than locks because freezes are guaranteed by law, as locks are an agreement between you and the credit bureau. In addition, the report noted, freezes are in general cheaper (perhaps free).

Regardless of which you choose, a fraud alert is a good thing to add on. It is free, lasts 90 days (you’ll need to extend it), and requires creditors to verify your identity. You only have to call one of the three credit bureaus, and they’re required to notify the other two.