Tax Identity Theft Part V: Using Credit Bureaus to Help Protect Financial Accounts

If you believe you’re a victim of identity theft, you should contact one of the three major credit bureaus immediately to place a “fraud alert” on your credit account. This critically important step makes it harder for identity thieves to obtain a credit card or loan in your name. Contacting a credit bureau can help you in many ways, including helping protect your tax information.

Below are the three main credit bureaus and their fraud reporting information:

In the event you find yourself an identity theft victim, you only need to contact one of the three to request a fraud alert. Bureaus are required to notify each other when a fraud alert is issued and you should receive a letter from each confirming they placed an alert on your file.

A fraud alert is free, remains in effect for 90 days and can be renewed if necessary. It provides a red flag where thieves may be trying to open accounts and legitimate businesses may take additional steps to verify identities.

Three types of fraud alerts are available:

  1. Initial Fraud Alert. If you're concerned about identity theft, but haven't yet become a victim, this fraud alert will protect your credit from unverified access for at least 90 days. You may want to place a fraud alert on your file if your wallet, Social Security card, or other personal, financial or account information are lost or stolen.
  2. Extended Fraud Alert. For victims of identity theft, an extended fraud alert will protect your credit for seven years.
  3. Active Duty Military Alert. For those in the military who want to protect their credit while deployed, this fraud alert lasts for one year.

Also, you should get your free credit report right away to ensure identity thieves have not opened additional accounts. Go to www.annualcreditreport.com, which is operated by the three major bureaus, or call 877-322-8228 to request a copy.

Fraud Alert vs. Credit Freeze

If you want even stronger protections or if you were part of a large-scale data breach, you might consider a “credit freeze” which applies even stronger protections but often times for a fee that varies by state.

A credit freeze, also known as a security freeze, lets you restrict access to your credit report, which in turn makes it difficult for identity thieves to open new accounts in your name. Unlike a fraud alert, you must contact each of the three credit bureaus to establish a credit freeze.

So, what’s the difference between a freeze and an alert? A credit freeze completely locks down your credit. A fraud alert still allows creditors to get a copy of your credit report as long as they take steps to verify your identity.

After receiving your freeze request, each credit reporting company will send you a confirmation letter containing a unique PIN (personal identification number) or password. Keep the PIN or password in a safe place as you’ll need it if you choose to lift the freeze. For example, if you apply for a credit card, a home mortgage or a job, you will have to temporarily lift the freeze so that the business may confirm your credit record.

For additional information about Tax Identify Theft, please visit www.irs.gov/identitytheft or contact one of our licensed tax professionals at (323) 257-5762.