Identity theft and the opening of fraudulent credit accounts in your name can not only be time-consuming to repair, but can also cause long-term damage to your financial well-being. As a consumer, you have two tools at your disposal to limit criminals from hijacking your credit: fraud alerts and credit freezes.

"These are good tools for protecting your credit, but they should not lead to a false sense of security," says Bruce McLary, senior vice president of membership and public affairs for the National Foundation for Credit Counseling. Even with fraud alerts and freezes, "everyone should remain vigilant and check their credit regularly."

Here's what you should know about fraud alerts and credit freezes.

Setting a fraud alert on your credit file prompts lenders and creditors to verify your identity before allowing you to open a new credit account. If you try to apply for a credit card or loan, the lender will call you and ask you to verify basic personal information to proceed with the application.

A credit freeze restricts access to your credit report and prevents others, including you, from opening new lines of credit in your name. It essentially stops the application process because companies cannot see your credit history when they try to pull it to approve your application. You can still apply for employment or a rental while a credit freeze is in effect.

It is important to note that neither fraud alerts nor credit freezes affect your credit history or credit score.

Both fraud alerts and credit freezes are free to consumers. There is no charge to freeze or thaw your credit. Fraud alerts also come with free access to credit reports. There is one per year per bureau for basic alerts and two per year per bureau for extended alerts.

The duration of the fraud alert depends on the type of alert you set up. For most consumers, a basic fraud alert is valid for one year and can be renewed at the end of the term. Extended fraud warnings are available to those who have experienced identity theft and have filed an identity theft report with the Federal Trade Commission or a police report and are valid for seven years. [The credit freeze lasts until thawed. Credit reporting agencies generally temporarily unfreeze credit files for a period of time (a few days or weeks) so that you can apply for a new card or loan, or you can unfreeze your account permanently. Experian also allows single lender thawing with a one-time PIN that allows creditors to access your file.

To activate the fraud alert, contact one of the three major credit bureaus: Equifax, Experian, or TransUnion. That agency must communicate your request to the other two agencies, so this process only needs to be done once. You can set up an alert by phone or online.

To freeze your credit, you must contact all three credit bureaus separately. As with fraud alerts, this process can be done by phone or online.

You will need to provide some personally identifying information and you will need to set up an online account if you do not already have one. The process for canceling an alert or unfreezing your credit file is generally the reverse of the initial setup.

Lifting a credit freeze can be a bit tricky if you need immediate access to your credits. If you plan to apply for a new line of credit, unfreeze your credit at least one hour before you do so. Some credit bureaus may allow you to schedule a temporary thaw in advance.

Also note that you may have to temporarily unfreeze all three agencies if you do not know which agency the credit company or lender is using to inquire about your credit.

Fraud Alert and Credit Freeze are both tools that can help limit unauthorized access to your credit and prevent bad actors from opening accounts in your name.

Fraud Alerts are good basics for most people as free tools that allow you to continue applying for credit without hassle (other than picking up the occasional phone call from a credit company). If you plan to open several new credit accounts in the near future, you may want to take advantage of it now.

If you don't plan to open any new credit cards or take out any loans in the near future, then a credit freeze is an even safer option. Credit bureaus used to charge a fee to freeze and unfreeze credit files, making this option unattractive to many consumers. Today, however, this service is free, and it is relatively easy to temporarily thaw a file.

But don't stop there. McCrary also recommends accessing your credit report regularly and using the security measures and identity verification provided by your financial institution to stay on top of potential fraudulent activity. Also, if there is a data breach at a company that has your personal information and that company offers free identity theft protection as compensation, take them up on their offer.