Credit Freezes: How They Work and How to Place One
by Michelle Black, CreditWriter.com
Did you know that your credit is actually a pretty big deal? The condition of your credit reports and scores is going to be used to judge you over and over again throughout your entire adult life. Want to lease a new apartment? Your credit matters. Ready to purchase a home or a vehicle? Your credit matters. Taking out a new insurance policy? Your credit matters again. In fact, your credit might even determine whether or not an employer wants to hire you.
In a world where your credit clearly matters so very much, the importance of protecting your credit simply cannot be overstated. Sound credit management habits are essential, but that alone is not enough to ensure that your credit reports stay in tip top shape. You also need to understand the ever-present need to protect your credit reports from fraud.
Thankfully there are a number of methods which you can (and should) employ in order to protect your credit reports. However, nothing can protect your credit reports from fraud better than a credit freeze.
What Is a Credit Freeze?
If you have ever been a victim of identity theft then you may already be familiar with the credit freezes which are offered by each of the 3 major credit reporting agencies – Equifax, TransUnion, and Experian. Even if your identity has never been stolen, more and more consumers are taking advantage of the credit freeze tool in light of the ever increasing number of data breaches which continue to compromise the personal identifying information of so many Americans.
As mentioned above a credit freeze, also known as a security freeze, offers you the most effective way to protect your credit reports. A credit freeze allows you to restrict access to your credit reports. When you place a freeze on your 3 credit reports those reports are actually taken out of circulation. No new lender will be able to access your credit reports unless you first “thaw” your reports. As a result, if a crook tries to apply for a fraudulent account in your name the application is probably going to be denied whenever the lender is prevented from pulling your credit reports. Your information may still be out there, but the identity thief will typically be unable to open new accounts in your name.
How to Place a Credit Freeze
Anyone can place a freeze on their credit reports and it is generally inexpensive to do so (typically $3 – $10 per credit bureau). If you can prove that you are a victim of identity theft then even that small fee may potentially be waived.
It is important to remember that you will need to contact each of the 3 credit reporting agencies individually in order to freeze your 3 credit reports. Freezing a single credit report or even 2 of your reports will not adequately protect you from fraud. You can request a credit freeze online or via phone:
• Equifax – (800) 349-9960
• TransUnion – (888) 909-8872
• Experian – (888) 397-3742
Once you have successfully placed a credit freeze each credit reporting agency will provide you with a PIN number which you can use to thaw your credit reports in the future if desired. (NOTE: You might be charged another fee to remove a freeze from your credit reports as well.)
A Credit Freeze Will NOT…
- Stop Prescreened Credit Offers
Believe it or not, in the United States it is actually legal for credit card issuers and insurance companies to access some of your credit information without your permission. The catch is that the company must send you a “firm offer of credit or insurance” in order to access your credit. A credit freeze will not stop you from receiving such prescreened offers. However, if desired you can always opt out of these anytime at OptOutPrescreen.com.
- Prevent You from Checking Your Own Credit
You will still be able to access your own personal credit reports even if they are frozen. You can also still take advantage of your free annual credit reports via AnnualCreditReport.
- Impact Your Credit Scores
Credit scoring models are not designed to pay any attention to whether or not your credit reports are frozen. As a result, placing a credit freeze will not impact your credit scores – for the positive or the negative.
- Prevent You from Getting New Credit
When you place a credit freeze on your reports you are going to need to plan ahead before you apply for new financing in the future. You are able to request a lift of your credit freeze at any time (additional fees may apply) and the credit reporting agency must honor your request within 3 business days or less. Keep in mind that if you plan to apply for a job where an employer may wish to check your credit then you will need to plan ahead to lift your credit freezes in this situation as well.
Already a Victim of Identity Theft?
If you are already a victim of identity theft then placing a credit freeze on your reports is not going to solve all of your problems. A credit freeze may help to thwart future fraudulent activity on your credit reports, but you are still going to need to take steps to undo the existing damage.
Thankfully the Fair Credit Reporting Act (FCRA) provides extensive protections if you have been a victim of identity theft. You can exercise those rights on your own or you can hire a professional credit repair expert to work on your behalf. CLICK HERE to find a NACSO member in your area.