Credit file alerts Canadian equivalent of U.S. freeze

Whether the average Canadian is more reserved than the typical American is subject to friendly debate. But there's one way U.S. residents can indisputably be more direct: restricting third parties from peeking at their credit reports. Americans can order credit bureaus to block or "freeze" third parties -- including creditors -- from viewing their credit file. But no Canadian province or territory has any law that enables such tough credit file protections.credit-report-alert

"TransUnion Canada does not offer the same type of credit report freeze as ... the U.S., but we do make available fraud alerts," explained John Branham (Branham was a TransUnion spokesperson when he commented, but is no longer in that position). Similarly, director of operations Paul Lefevre confirms that Equifax Canada also provides alerts and credit monitoring safeguards rather than inquiry-blocking freezes.

Only Manitoba and Ontario have legislation that compels credit bureaus to offer alerts to residents. Nevertheless, TransUnion and Equifax allow all Canadian adults to place comparable alerts on their credit reports.

How credit file alerts work
"[With a credit file alert,] any request for a new credit product or a change cannot proceed until the potential credit grantor checks with the consumer who owns the credit file account," says Lefevre.

The two credit bureaus offer different services for their alerts.

TransUnion Canada calls theirs a "potential fraud alert" and also offers protection for your social security number. Equifax Canada has three varieties of alerts:

  • Identity alerts for Manitobans and Ontarians;
  • Lost or stolen alerts if personal identification or financial information has gone missing; and
  • Fraud alerts after a suspicious credit application or unauthorized charges appear on your file.

Here's an example of Equifax Canada's identity alert wording: "Alert to verify consumer's identity -- please contact consumer at (xxx) xxx-xxxx before extending credit."

Lost or stolen alerts and fraud alerts are worded slightly differently, but all alerts remain on your credit file for six years unless you apply to delete them.

The identity alert and lost or stolen alert each cost $5 plus applicable tax, while fraud alerts are free. Applicants must prove that there has been an incident that justifies adding the fraud alert to their report.

An Equifax Canada fraud services representative confirms that, even after an alert is activated, Canadian consumers are responsible for reporting any suspicious credit file activity to the credit bureau.

Alerts vs freezes
Unlike a U.S.-style freeze, alerts don't prevent financial institutions and other creditors from viewing your credit report data. And Americans don't need to give a reason for invoking a security freeze.

Credit Counselling Canada's executive director Patricia White says, "If you have been a victim of identity fraud, the U.S.-style security freeze could be a better safeguard than an alert, which doesn't have the same teeth."

White points out that credit freezes and alerts can delay decisions if you are applying for credit and may take time to remove, even temporarily. This means you can bid adieu to obtaining instant credit approval at point of sale.

Lefevre says alerts do not harm a consumer's credit score nor do they adversely impact existing credit facilities.

Jeffrey Schwartz, executive director of Consolidated Credit Counseling Services of Canada, says that a security freeze could cause some creditors to form opinions about the consumer after not being able to pull their credit report. That negative impression would be less likely when credit grantors read a clearly worded alert statement on the consumer's credit file. Yet he concedes that a security freeze could make sense depending on where the consumer is in their lifecycle.

"If you're a lonely senior not using credit and are a vulnerable target for identity theft, then that might be the perfect opportunity to put a freeze on your credit report to protect against potential fraud."

Other protective measures you can take
Despite the lack of credit file freezes, Canadians shouldn't be timid about using all available tools to protect their credit profiles, such as checking them annually. While credit reports are not included with the alert services, consumers can obtain hardcopies by mail at no cost.

White says to scrutinize your credit product statements every month for discrepancies -- and more often if you think your information may have been compromised. She notes that credit report freezes won't protect you from credit card fraud if someone has already stolen your card account information.

Credit bureaus also offer monitoring services, which notify consumers of changes to their credit file, including debts they don't owe and surreptitious fiddling with an account's contact information.

There is another option for Canadians: "Consumers should approach their financial institutions -- they can freeze your banking and credit card accounts after a suspicious chain of events," says Schwartz.

See related: 7 surprising facts about your credit score; What to do about wrongful debt collection notices 
Updated June 19, 2015

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