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Columns: Dr. Don
Don Taylor, Ph.D., CFA, CFP   Expert: Don Taylor, Ph.D., CFA, CFP
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Some willing to pay for convenience
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Security freeze better than fraud alert
 

Dear Dr. Don,
I know you are able to get one free credit report a year from each of the credit bureaus, which I already do. But I've also read that you are able to set up free fraud alerts with them.

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Then, I read an article about the identity-protection services LifeLock and others provide. It seems these companies charge you for something you can get for free. Do you know anything about this?
-- Mary Kay

Dear Mary Kay,
Maybe we were reading the same Bankrate articles -- including "Hire identity theft help or do-it-yourself" -- that are part of Bankrate's Financial Literacy series.

You can place an initial fraud alert on your account with the credit bureaus (TransUnion, Equifax and Experian). This initial alert is active for 90 days. If you've been the victim of identity theft, you can place a longer fraud alert on the account so you don't have to renew the alert every three months.

The extended fraud alert remains on your credit report for seven years. Active duty military personnel can have a one-year fraud alert put on their account.

To my mind, fraud alerts generate a false sense of security because they don't stop a prospective lender from pulling your credit report or granting you credit. Instead, they simply alert the lender that there's a potential identity theft problem with the account. I think a security freeze is a much better approach.

I put an initial fraud alert on my account once (I don't remember with which credit bureau) and was surprised to get a free copy of my credit report in the mail. I shouldn't have been surprised -- suspected fraud is one of the qualifications for getting a free copy of your credit report under the Fair Credit Reporting Act.

Here's how the FTC explains it in its Facts For Consumers publication, "Your Access to Free Credit Reports."

Q: Are there any other situations where I might be eligible for a free report?
A: Under federal law, you're entitled to a free report if a company takes adverse action against you, such as denying your application for credit, insurance, or employment, and you ask for your report within 60 days of receiving notice of the action. The notice will give you the name, address, and phone number of the consumer reporting company. You're also entitled to one free report a year if you're unemployed and plan to look for a job within 60 days; if you're on welfare; or if your report is inaccurate because of fraud, including identity theft. Otherwise, a consumer reporting company may charge you up to $10.50 for another copy of your report within a 12-month period.

While I sometimes find myself humming the music to the ad for FreeCreditReport.com, I know that the site requires enrollment in Experian's Triple Advantage credit monitoring service that bills out at $14.95 per month if I don't cancel within the seven-day free trial period. To be fair, the ads and the site are very upfront about the enrollment requirement.

I subscribed to the Triple Advantage service for a year when it was provided to me free because my personal information was stolen as part of the ChoicePoint data security breach. I liked the service but didn't continue my subscription, feeling that I could do a fair job on my own.

I haven't reviewed the LifeLock service, although the article mentioned earlier does discuss it. But paying someone to do something you could do for yourself built America's economy. (It also keeps me from having to mow the lawn!)

It's not scandalous, just a measure of what Americans are willing to pay for convenience and service.

Bankrate.com's corrections policy -- Posted: June 16, 2008
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 RESOURCES
Hire identity-theft help or do it yourself?
Understanding credit reports
12-step program for ID theft victims
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