What is a Credit Report Freeze?
We’ll begin with the what. The credit freeze, also known as security freeze, is a benefit that protects your credit report from hostile actors and unauthorized prying eyes.
A credit freeze, also called a security freeze, prevents hard inquiries into your credit report as long as the freeze is in place. Since most lenders and credit card issuers require a peek at your credit report before they’ll approve an application in your name, any credit-based applications made while your credit report is frozen will likely be denied.
If you want to apply for credit, you can temporarily lift the credit freeze so lenders can pull your credit report.
Although a credit freeze locks your credit report from inquiries, existing creditors still have the right to access your report. Additionally, debt collectors referred by your existing creditors can still access your credit report.
Each state has laws and regulations governing credit freezes and some states have no laws regarding credit freezes. In the absence of state law, credit freezes are subject to each credit bureau’s policy. In some states, for example, potential landlords, employers and insurance companies also have the right to pull your credit report even though you’ve added a security freeze.
When Should I Freeze My Credit?
There are a few good reasons to freeze your credit report.
To Prevent or Respond to Identity Theft
If you are the victim of identity theft, a credit freeze offers you the best possible opportunity for a good outcome. Freezing your credit report can also be useful if your personal information has been compromised and you want to prevent identity theft.
After An Ugly Divorce or Break-up
Let’s be honest, your significant other likely knows your social security number, date of birth, employer, residence address and other critical pieces of personal information. If you have genuine concerns that this information might be misused, the credit freeze option is a way to protect your finances.
Give Yourself Peace of Mind
Anyone concerned with potential identify theft may gain peace of mind by implementing a credit freeze. This is particularly true for senior citizens because typically, they are not actively opening new accounts. Moreover, most are on a fixed income and it is more economical to institute a freeze, which can last indefinitely, as opposed to paying a monthly fee for credit monitoring.
How to Freeze Your Credit Report
Freezing your credit report may cost between $5 and $15, depending on your state. You may also have to pay a cost to temporarily lift the freeze, lift it for a specific company, change your password, or permanently remove the security freeze.
If you’ve been a victim of identity theft, freezing your credit report is free. The credit bureau may require a police report or identity theft affidavit as proof of identity theft.
To initiate a credit freeze, you must contact each credit bureau individually. Their contact numbers and URLs are listed below:
Each credit reporting agency will assign you a personal identification number (PIN) and a corresponding password. Be sure you record these carefully and retain them in a safe place. They will be needed to unfreeze your credit report, either short-term or indefinitely.
Freezing your credit report can make transacting normal business a little more difficult. Businesses pull your credit for more services than you may realize. For example, if you’re moving an establishing new utility services, the company will likely need to check your credit report first. If you don’t proactively unlock your credit report, opening new accounts or adding new services to your existing accounts can be a hassle. To complicate the process, many businesses only use one credit bureau – you’ll have to ask which one before applying for services or pay the cost of unlocking all three.
Potential Credit Freeze Loopholes
While a credit freeze is the best defense against someone using your private information to open accounts and ruin your good credit, it does not completely prevent your identity from being stolen. For example, if businesses are wiling to grant credit without the credit check, a thief could still open an account in your name.
That said, the credit freeze is an ideal, and often less costly, alternative to credit report monitoring for certain consumers, such as seniors or individuals with no immediate plans to open new credit accounts.
Dealing with identity theft can be costly and time-consuming. Adding a security freeze will protect your credit from would-be thieves, saving you the hassle of dealing with the aftermath of identity theft.