Keeping Your Credit Secure: The Power of Credit Freezes

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In the digital age, safeguarding your financial identity is paramount. One of the most robust tools at your disposal is the Credit Freeze. With the increasing occurrence of data breaches and identity theft, understanding and implementing a credit freeze is a vital step in securing your financial future. In this comprehensive guide, we will explore the ins and outs of credit freezes, their advantages, potential drawbacks, and the steps involved in implementing them.

Understanding the Basics: What is a Credit Freeze?

A credit freeze, often referred to as a security freeze, is a mechanism that allows you to control access to your credit reports. It is a preventive measure you can use to restrict access to your credit report, thereby limiting a potential thief's ability to open new accounts under your name.

When a freeze is activated on your credit file, credit reporting companies are prohibited from releasing your credit report without your explicit consent. This makes it highly challenging for identity thieves to open new accounts, as these often require a credit check.

The Need for A Credit Freeze

At the heart of the matter, the need for a credit freeze arises from the ever-increasing threat of identity theft and financial fraud. The surge in data breaches in recent years has left millions of individuals' personal information vulnerable to cybercriminals. When your personal data, such as your Social Security number, is exposed during a data breach, a credit freeze can act as a strong defense mechanism, preventing unauthorized individuals from opening new credit accounts in your name.

Who Can Access Your Credit File During a Freeze?

A credit freeze does not completely block access to your credit file. Certain entities can still view your file while a freeze is in place. These include:

·        Creditors of accounts you currently hold

·        Certain government entities like child support agencies

·        Companies that you've hired to monitor your credit file

Understanding Free Security Freezes

As of September 21, 2018, a federal law enables you to freeze and unfreeze your credit record for free at all three nationwide credit reporting companies - Experian, TransUnion, and Equifax. This law does not apply to someone who requests your credit report for employment, tenant-screening, or insurance purposes. In such instances, other credit reporting companies might charge a fee to place and lift a security freeze based on your state laws.

The Process of Initiating a Credit Freeze

To place a credit freeze, you must contact each of the credit reporting companies individually. Once you lodge a request for a security freeze, the credit reporting company must place the freeze within one business day if the request is made by telephone or secure electronic means. If the request is made by mail, the security freeze must be placed no later than three business days after receiving the request.

Additionally, the company must send you a written confirmation of the security freeze within five business days after it is placed. They must also provide instructions on how to remove the security freeze.

We highly recommend performing this freeze through each reporting companies’ website to streamline the process, which makes this whole process far less painful.

• My.equifax.com
• Experian.com
• Transunion.com

Temporarily Lifting a Security Freeze

There may be occasions when you need to temporarily lift the security freeze, such as when applying for a loan or credit card. Upon your request, the security freeze can be removed free of charge. The removal will take effect no later than one hour after receiving the request by toll-free telephone or secure electronic means, or three business days after receiving the request by mail. You also have the option to lift the freeze temporarily for a specific period of time, free of charge.

Credit Freeze for "Protected Consumers"

Federal law provides additional protections for "protected consumers" under the age of 16 and incapacitated persons or persons for whom a guardian has been appointed. Persons with authority to act for these protected consumers can request a security freeze.

Credit Freeze vs. Fraud Alert

Though they serve similar purposes, credit freezes and fraud alerts are different tools you can use to protect your credit. While a credit freeze blocks all credit inquiries except from current creditors or government agencies, a fraud alert prompts any creditors to take extra steps to verify new credit inquiries.

The Impact of a Credit Freeze on Your Credit Score

A common concern among consumers is whether a credit freeze can affect their credit score. The simple answer is no. A credit freeze does not have any impact on your credit score. However, it's important to note that a credit freeze does not prevent you from opening new accounts, accessing your annual credit report, or protect any current accounts that may have been compromised.

The Pros and Cons of a Credit Freeze

Like any financial decision, placing a credit freeze on your credit file comes with its advantages and disadvantages. It's essential to weigh these before deciding to freeze your credit.

Advantages of a Credit Freeze

• Free of Cost: Credit freezes are completely free. This means you can secure your credit file without incurring any costs.
• Prevents Unauthorized Credit Opening: A credit freeze can effectively prevent identity thieves from opening new credit accounts in your name.
• No Impact on Credit Score: Freezing your credit does not affect your credit score.
• Protection Against Identity Fraud: A credit freeze can serve as a robust shield against some types of identity fraud.

Disadvantages of a Credit Freeze

• Doesn't Protect Existing Accounts: A credit freeze can't prevent thieves from accessing your existing accounts. This means fraudulent charges could still be made on a payment card in your wallet.
• Requires PIN Tracking: To lift or freeze your credit reports, you need to provide your PIN. If you lose or forget your PIN, you'll have to go through extra steps to get a new one.
• Effort to Remove: Removing a credit freeze requires some effort. You'll need to contact all three credit bureaus to do so. Our tip, use the online portals.
•  Need to Lift for New Credit: When you want to open a new line of credit, you'll need to lift the freeze to give the creditor access to your file. Not really a disadvantage but it is something to keep in mind if you are making a large purchase like a home or vehicle.

Tips for Monitoring Your Credit

Even after placing a credit freeze, it's crucial to continue monitoring your credit. Regularly check your credit reports for suspicious activity and review monthly statements thoroughly. If you notice any fraudulent activity, report it immediately.

Credit Freeze FAQs

Is Freezing Your Credit a Good Idea?

If you're apprehensive about identity thieves using your personal information to open fraudulent accounts or lines of credit, then a credit freeze can prevent that from happening. Credit freezes are free and have no effect on your credit score, so there's no harm in doing so.

How Do I Freeze My Credit with All Three Credit Bureaus?

To initiate a credit freeze for each credit bureau, you'll need to call or use their websites. Remember, each bureau handles credit freezes independently, so you'll need to apply to each one.

What Does a Credit Freeze Do?

A credit freeze blocks any new credit inquiries unless they're from a current creditor or government agency. This can keep identity thieves from opening credit accounts or loans in your name.

We tested it by signing up with each agency and froze all accounts.  We proceeded with the purchase of a work vehicle and the freeze prevented that from moving forward. Our next step was to unfreeze the accounts for one hour, which allowed the dealership to make their inquiry within that one hour window.  Our accounts froze after the hour was up. Using the online portals made this experience painless and it did exactly what was expected.

Credit freezes and locks are powerful tools in the fight against identity theft and unauthorized credit opening. By understanding their benefits and potential downsides, you can make an informed decision about whether these protective measures are right for your financial situation.