A credit freeze is a complete lock-down of your credit report. It involves restricting the major credit bureaus from selling or sharing your data to creditors. By doing so, the only new lenders who can see your credit report are those that you authorize first.
The credit freeze is a great safety mechanism for all. For identity theft purposes, it serves as an effective way to stop an fraudster from taking over your identity. An identity thief will be unable to do anything with a new creditor, as only you can authorize that they view your credit report. This drastically reduces the chances of an identity thief having the ability to defraud you.
How Exactly Does a Credit Freeze Work?
Think of a credit freeze as a way to lock up your credit account approval in a safety deposit box, which can only be opened with two keys. The first key is held by the bank, but freely available to legitimate lenders. The second key is held by you — thus, you have the power to only approve the opening of a new credit account IF you deem it appropriate.
By placing a credit freeze on your credit file, you will accomplish the following:
- Identity theft prevention. Fraudsters will no longer be able to abuse any sensitive information about you. If you suddenly lose your wallet, there is no concern over whether the person who finds it is faithful. The credit freeze ensures that you (and only you) have full control over your identity as a borrower.
- Credit score protection. New credit report inquiries will not be unnecessarily made. This means you do not have to worry about a fury of inquiries causing your credit rating to drop. With more authorization layers in place, more score-affecting circumstances will be blocked from affecting you.
- Safety during divorce. When going through a divorce, your partner will not be able wreck your credit. Your soon-to-be ex has a lot of information on you, so your divorce period could spell disaster for your identity. The credit freeze will stop them from having the ability to defraud you and/or ruin your consumer records.
These are just some of the many examples of how setting up a credit freeze can benefit you. That is not to say that a credit freeze is a bulletproof form of protection. There are still many limitations involved, which you must be aware of before you make the decision to put a credit freeze on your file.
Credit Freeze Problems – What You Need to Know
A credit freeze is a complex security feature that all American consumers can request. When doing so, it is important to make the request at each of the three major credit report bureaus. This means you need to separately request a credit freeze from Equifax, Experian, and TransUnion.
Meanwhile, you must keep in mind the following limitations involved when using a credit freeze on your credit account. The list below covers the majority of issues that come up; make sure to figure out whether any will cause roadblocks for you.
- Only a “partial” freeze. Requesting a credit freeze will not cause your entire credit report to get locked down. There are still cases where a creditor could be able to pull your file. The most notable example would be when dealing with a lender who regularly posts on your credit report. For instance, any company you have a credit card with right now will be able to pull your credit report still.
- You need PIN protection. While it’s not a big deal, you are required to supply a PIN number in order to lift the credit freeze. This means you always need to know this number whenever you work with a new lender. If you are not discreet about this security code, it’s possible that a fraudster obtains it and uses it for bad.
- Ineffective identity theft prevention. While a credit freeze does help, it is not enough on it’s own to guarantee that you will not become an identity theft victim. The biggest problem is that it can only keep a person’s identity safe from future fraud. If an identity thief has a fraudulent account in your name already, the credit freeze will not help your identity safety concerns.
- Some delays could happen. The process of ‘thawing’ your credit file is complex, and a temporary lift for a new lender is not always the fastest exchange. If you are lifting your credit freeze to qualify for a new job, as a result of a background check requirement, then it could delay your start date. Also, if you need an emergency loan it’s possible the money will come in too late as a result of the ‘freeze-lift’ delay.
How Long Does a Credit Freeze Last?
While fraud alerts run out after anywhere from six months to seven years, no such time restriction exists when dealing with credit freezes. As such, the freeze will remain on your credit report until you decide to lift it.
Now, there are two different cases where a credit freeze gets lifted — which are, 1) to show a new lender your credit report, and, 2) to remove the freeze from your credit file for good.
How to Lift a Credit Freeze Temporarily
A temporary lift of your credit freeze is used to show your credit report to a prospective lender, without causing the freeze to get removed forever. This is done by making a credit freeze lift request with each of the three credit report bureaus.
If possible, you can choose to lift the freeze for a specific lender only instead of fully lifting the freeze off your report for a short duration. This might have a different cost, as some states bill separately for general temporary lifts when compared to temporary lifts for specific lenders.
Permanently Removing a Credit Freeze
A permanent removal of your credit freeze is done whenever you no longer need this extra layer of security. This could be done for almost any reason, such as because you finalized your divorce process or determined your identity was not actually stolen. Many also choose to remove the credit freeze for good because it’s too annoying to have to request a temporary lift every time they deal with a new lender.
Either way, the permanent removal of your credit freeze will at least save you from having to pay every time you need the freeze lifted. If you apply for a bunch of new credit at once, your state might allow you to pay for one temporary lift to cover all prospective creditors. Although, a more spread-out application process would mean you could be held liable for a new charge for every new credit report inquiry.
Whether you need a temporary lift or you require permanent deletion, the process is much of the same. You can find more information from each of the credit-reporting agencies at their respective ‘Credit Freeze’ pages.
Note: Most state laws indicate that credit freezes last for as long as consumers want. Kentucky, Pennsylvania and South Dakota still follow the 7-year expiration term — this might change with time, though. In 2009, Nebraska switched from expiring to non-expiring credit freezes. You should check out the credit freeze laws by state to get a better understanding on your rights.
Are Credit Freezes Free?
Some states offer free credit freezes under special circumstances. The main scenario would be if you are an identity theft victim — this already gets you a free 7-year extended fraud alert, but in certain state’s the security freeze is also free.
Ask yourself the following:
- Are you placing a security freeze on a minor’s credit report?
- Are you a senior looking to put a credit freeze on your file?
- Have you been victimized by an identity thief in recent years?
If you answer “YES” to any of those questions, then it’s essential that you check to see whether your state will place the freeze for no cost.
As of 2015, there is more than a handful of states that offers free credit freezes to seniors 65 years of age or older. This number is expected to go up; only Nebraska has formerly offered free credit freezes to minor’s, but that could also change in soon time. Although, it’s important to note that the ‘free’ part is often just for placing the freeze and not for lifting or un-freezing your credit report.
Now, the credit freeze costs can vary a lot by state. It can run anywhere from $3 to $20 to place a credit freeze and/or to temporarily lift it. Some states charge as little as $3 per action, while others will charge a lot for placing the freeze and then nothing for lifting it. It really can vary drastically, which is why you should find out about the costs through your state Attorney General’s office.
Credit freeze laws are always changing, so make sure to keep up-to-date with the laws that apply for your state!
Credit Freeze or Fraud Alert?
Many make a mistake between these terms and think that a credit freeze and a fraud alert are two of the same. The truth is that there are many differences, and a fraud alert does not even start to compare with what a credit freeze can do.
A fraud alert is nothing more than a little note that gets made on your credit file. It informs the person looking at your report that someone else might have your personal information. This gives the lender a reason to pick up the phone and give you a call — by doing so, your identity gets verified before a new account is opened in your name.
This sounds like the perfect solution, but it’s not. The fraud alert will only suggest extra precautions are followed, it will not enforce any additional safety. This means the lender could look at the notation and not care — from there, that same lender could approve the new credit account without reaching out first.
Meanwhile, a credit freeze will protect your information from getting into anyone’s hands unless you want it there. This means your file never gets viewed by the new lender in the first place, so an identity thief’s plans could get foiled very fast. You can request a temporary lift of the credit freeze whenever you deal with a new lender; in the end, only the creditors you trust will have access to your credit file.
Credit freezes are much more effective under almost every example. If the limitations of these security freezes are insignificant to you, then it makes much more sense to place a credit freeze than a fraud alert!
Credit Freeze vs. Identity Theft Protection Services
With all that in mind, it might sound like credit freezes double as identity theft protection. The truth is that it can assume that role for you, but it will not do so with a 100% guarantee.
Identity theft protection services are appealing because, with them, you do not have to worry about being held liable. If your identity gets stolen, the countless hours of paperwork and phone calls is not your problem. The same is true for many of the costs involved with restoring your identity.
Yet, a credit freeze on it’s own will stop a lot of identity theft attempts. The only problem is that it does not continuously monitor your credit accounts for you. If an identity thief has your personal information, it’s possible for the fraudster to get access to your open credit lines. These are not protected under the credit freeze and, without adequate credit monitoring or identity theft protection, it’s possible the identity crime goes unnoticed for years.
That said, a credit freeze offers a tremendous amount of added security to your credit report. It is recommended that you get a credit freeze whether you have identity theft protection or not. But, investing in a service that offers many different identity theft prevention mechanisms is still worthwhile — for around $10 to $25 per month, you can drop all liability and get informed right away if a criminal targets you.
Conclusion: Credit Freezes Do Help Protect You!
Many identity crimes involve new account fraud. This consists of new credit lines opening in the victim’s name. These accounts could go unnoticed for days, months or years, depending on how often you monitor your credit report.
A credit freeze will stop an identity thief from being able to defraud you. When the criminal tries to open a new account, the lender will only be able to pull your file with your authorization. If you are not reachable, and the identity thief does not now your PIN number, then the new account will not open. This stops the fraudster dead in their tracks and saves you from facing years of identity restoration stress.
To conclude, a credit freeze is a significant tool that has the power to substantially reduce your chances of becoming an identity theft victim. If you are comfortable with the costs and delays involved with placing, lifting and removing your credit freeze, then it is definitely a worthwhile investment to make!