Do you want to learn how to protect yourself from data breaches? Well you’ve come to the right place. Learn all there is to know about credit freezes to protect yourself from fraud.
Identity theft and data breaches are serious issues. According to Javelin Strategy & Research, identity fraud reached an all-time high in 2017, with 16.7 million victims in the United States. With 1,579 recorded data breaches affecting approximately 179 million personal and financial records, the number of data breaches has reached a new high. One technique to potentially prevent identity thieves from acquiring your information is to freeze your credit report. A credit freeze prevents existing creditors from accessing your credit and can only be released at your request, making it more difficult for someone to fraudulently seek credit in your name.
Now, thanks to federal legislation (the Economic Growth, Regulatory Relief, and Consumer Protection Act) that went into effect on September 21, 2018, you will be able to freeze your credit for free, protecting your personal and financial information. The law also increases the duration of a fraud alert from 90 days to one year.
Continue reading this article to know more about Credit freeze to protect yourself from data breaches and identity.
Table of Contents
- 1 What Is a Credit Freeze?
- 2 How a Credit freeze works?
- 3 Example of a Credit freeze
- 4 How to freeze your credit?
- 5 How to unfreeze your credit?
- 6 When should I freeze my credit?
- 7 Who can access my frozen credit report?
- 8 Pros and Cons of freezing your Credit report
- 9 Credit Lock vs. Credit Freeze vs. Fraud Alert
- 10 Credit freezes vs. monitoring
- 11 What’s changing for Credit freezes
- 12 Other ways to protect your credit
- 13 Conclusion
What Is a Credit Freeze?
A credit freeze, also known as a security freeze, is an anti-fraud measure in which a credit bureau refuses to share a consumer’s credit report with anyone other than the consumer. Credit freezes are frequently requested by consumers who believe their identities may have been stolen. Victims often prefer to freeze their credit to prevent thieves from using their information to open new accounts or make purchases, limiting the damage caused by the theft. No financial institutions or third parties will be able to access a consumer’s credit information until the credit freeze is lifted.
How a Credit freeze works?
A credit freeze gives a consumer control over and restriction on their credit report. Thieves, scammers, and other unauthorized parties will have a harder time opening credit in that consumer’s name without their permission. The top three credit bureaus are required by federal law to comply with a consumer’s credit freeze requests at no cost. 2 The practice has become one of the most common ways for identity theft victims to protect themselves.
The value of credit freezes in preventing identity theft stems from the fact that identity thieves frequently attempt to open new credit accounts using stolen information.
They might, for example, apply for new credit cards and lines of credit in order to make large purchases and then leave the victim to deal with the debts. Lenders will typically request a copy of the borrower’s credit report as part of the application process for new accounts. As a result, victims of identity theft can prevent thieves from opening new accounts in their names by freezing their credit, potentially saving them a lot of money.
Credit freezes can be a useful tool in the fight against identity theft, but they aren’t a complete solution. After all, freezing one’s credit doesn’t stop a thief from gaining access to accounts that have already been established. The thief may have already used the victim’s existing accounts to make purchases or transfer funds by the time the victim realizes their information has been stolen. As a result, all consumers should take precautions early and keep a close eye on their account activity in order to spot any suspicious changes or transactions.
When you place a credit freeze with one of the three major national credit bureaus—Equifax, Experian, or TransUnion—you’re basically telling them that you don’t want anyone to have access to your credit file. While a credit freeze is in effect, there are some exceptions to who can and cannot see your credit file.
A credit freeze can last as long as you want it to; the decision to lift it is entirely up to you. Thanks to a 2018 change in the law, freezing your credit is now completely free. There used to be a fee for freezing and unfreezing your credit.
Credit freezes will not affect your credit score and will not prevent you from receiving your free annual credit reports. However, if you want to apply for loans or credit cards, you’ll need to lift the credit freeze so creditors can access your information. However, you are not required to lift a credit freeze in order to apply for a job or rent an apartment.
Example of a Credit freeze
Dorothy has been a loyal customer of XYZ Company, a well-known e-commerce retailer, for many years. She receives an email one day informing her that her customer data, including her credit card information, may have been compromised as a result of a large-scale attack on XYZ’s servers. When Dorothy learned of this, she realized that the hackers might be attempting to steal the customers’ identities, in which case they would most likely try to monetize the information by selling it online, making fraudulent purchases, or opening new credit accounts.
Dorothy began by notifying her bank and credit card issuer of the breach, locking her credit card to prevent unauthorized transactions, and requesting that a replacement card be mailed to her. Then she contacted the three major credit bureaus—TransUnion (TRU), Equifax (EFX), and Experian (EXPN)—and requested a credit freeze.
Because Dorothy’s credit has been frozen, any new account requests made by the hackers will almost certainly be denied when the financial institution sees her credit has been frozen. Dorothy would have bought herself time to replace her credit card and protect herself from further harm if she had taken these precautions
How to freeze your credit?
If you want to freeze your credit you can do so by contacting each of the three major credit bureaus. Here’s how to reach them:
- Equifax: Online at https://www.equifax.com/personal/credit-report-services/credit-freeze/ or by phone at 800-685-1111
- Experian: Online at https://www.experian.com/freeze/center.html or by phone at 888-397-3742
- TransUnion: Online at https://www.transunion.com/credit-freeze or by phone at 888-909-8872
You’ll need to give each credit bureau your name, address, date of birth, Social Security number, and other identifying personal information to freeze your credit. To freeze and unfreeze your credit, Experian and TransUnion require you to create a unique PIN, whereas Equifax does not. It’s free to freeze your credit, but you’ll need to do it with all three credit bureaus to lock down each of your credit reports. The freeze will remain in place until you remove it. You can also place a freeze on your account over the phone. You’ll need to provide your name, Social Security number, date of birth, address, and phone number when you choose to freeze your credit.
You’ll have to make another request to unfreeze your credit once it’s been frozen, but it won’t cost you anything. When unfreezing your credit file, just keep the timing in mind.
According to Rossman, the new law requires credit freezes to be lifted in less than an hour, but he advises giving yourself more time if you plan to apply for credit soon after. He recommends lifting a freeze three business days before applying for a loan if you’re shopping for a car, for example, to avoid being stuck in limbo while waiting for financing to be approved because your credit file is inaccessible.
Another thing to keep in mind is that the new law extends short-term fraud alerts to a year, rather than the previous 90-day limit. When a fraud alert is placed on your credit file, lenders are required to contact you to verify your identity if they receive a credit application in your name.
Your credit scores will not be frozen if you freeze your credit reports. While a credit freeze is in place, your credit score can still rise or fall depending on the information reported to the credit bureaus.
How to unfreeze your credit?
You may decide that the credit freeze is no longer necessary at some point. You might also want to lift the credit freeze temporarily so you can apply for a mortgage, credit card, or other loan. You’ll have to contact each credit bureau separately to unfreeze one or all three of your credit reports. You’ll need to provide the PIN you created earlier to TransUnion and Experian.
When you request that a credit bureau lift your credit freeze, it must do so within a certain amount of time. The freeze must be lifted within one hour of receiving a phone or online request. If the request is made by mail, the freeze must be lifted no later than three business days after it’s received.
When should I freeze my credit?
When it comes to protecting your credit after being a victim of identity theft, you have several options to consider. A security alert may be sufficient in many cases. You can add a phone number to a security alert, also known as a fraud alert, so lenders can call you when they receive an application to verify that it’s you who’s applying. When you add an initial security alert or victim statement, you can also request additional free credit reports. Examining your report can assist you in determining whether you are a victim and taking appropriate action.
In more extreme cases, such as when you’re being targeted by fraudsters on a regular basis, a security freeze may be necessary. If any of the following apply to you, it’s worth thinking about taking steps to protect your credit:
- Unexpected bills or collection notices are sent to your address, either in your name or under the name of someone else.
- On your credit report, new inquiries or credit accounts appear, indicating activity with lenders or other companies you’re unfamiliar with.
- Fraudulent activity on an account is reported to your bank or credit union.
- You are notified that you have been or may be the victim of a data breach.
Who can access my frozen credit report?
Although a credit freeze prevents most credit inquiries, certain parties can still access a frozen report under certain conditions, such as:
- You, when you view your own credit report.
- Lenders and card issuers with whom you have accounts, who use credit checks in their account management processes.
- Landlords and rental agencies, screening you as a potential tenant.
- Phone carriers and utility companies, to set the amount of security deposit required on equipment.
- Debt collection agencies, when attempting to obtain a payment.
- Child support agencies, for purposes of determining child support.
- Credit card issuers who have prescreened you for credit offers
- Auto insurance companies, which may include credit scores in their rate-underwriting process.
- Potential employers you’ve authorized, conducting background checks.
- Government agents, executing court orders or warrants.
Pros and Cons of freezing your Credit report
It is important to consider the benefits and drawbacks of freezing your credit reports. If you’re debating whether to freeze your credit, here’s how the pros and cons stack up.
- Secures your credit report to aid in the prevention of identity theft and fraud.
- There is no longer a fee for freezing or unfreezing your credit.
- Online, you can easily and quickly freeze or unfreeze credit.
- Your credit score will not suffer as a result of a credit freeze.
- A credit freeze will not completely prevent access to your credit report.
- You’ll need to unfreeze your credit before you can apply for loans
If you’re concerned about identity theft and don’t intend to apply for additional credit anytime soon, a credit freeze may be a good option. It adds an extra layer of security to your credit reports, which can be reassuring given the rise in fraud and identity theft. It’s also nice not to have to pay a fee to execute a credit freeze or unfreeze. However, there are other ways to safeguard your credit history from unauthorized access.
Credit Lock vs. Credit Freeze vs. Fraud Alert
Credit locks, credit freezes, and fraud alerts are all methods for safeguarding your credit information, but they differ in important ways. Understanding how they compare can assist you in deciding which one to use.
Here are the key points to remember about credit locks:
- A credit lock can be used to restrict access to your credit reports.
- You can lock or unlock your credit reports using your computer or mobile device.
- For this service, the credit bureau may charge you a monthly fee.
A credit freeze also restricts access to your credit reports. You can request a credit freeze with one or all three credit bureaus, and the freeze will remain in effect until you request that it be lifted. One significant difference is that you cannot do it yourself using an app.
A credit freeze, like a credit lock, can prevent unauthorized people from accessing your credit file, thereby discouraging identity thieves from opening accounts in your name. It does not, however, completely prevent access to your file. Creditors with whom you already have a relationship, as well as government agencies executing court orders, subpoenas, or search warrants, can still gain access to it.
There is no fee to freeze or unfreeze your credit, unlike a credit lock. If you want to place or remove a credit freeze, you must contact each of the three credit bureaus separately. If you request that your credit reports be unfrozen online or by phone, the credit bureau must do so within one hour. Otherwise, it may take up to three business days to lift a freeze.
If you have minor children, you can request that their credit files be frozen on their behalf.
A fraud alert is a notation that can be added to your credit report. Although fraud alerts are free, they do not completely secure your credit reports. Instead, before approving new lines of credit in your name, creditors and lenders must verify your identity. A regular fraud alert will appear on your credit report for one year, while an extended fraud alert will appear for seven years. If you’ve already been a victim of identity theft, an extended fraud alert is usually recommended.
A fraud alert on your credit profile is an alternative to freezing your credit. For one year, a fraud alert can protect your credit history from unauthorized access. An extended fraud alert can keep it safe for up to seven years. If you’ve already been a victim of identity theft, extended fraud alerts may be a better option. You must first create an identity theft report before contacting one of the three major credit bureaus to place an extended fraud alert. The credit bureau to which you report it must notify the other two bureaus.
A fraud alert or extended fraud alert will not completely lock down your credit reports like a credit freeze does. They do, however, require creditors and lenders to go the extra mile and verify your identity before authorizing new lines of credit in your name. This may be a simpler solution if you’d rather not go to the trouble of freezing and unfreezing your credit file.
Credit freezes vs. monitoring
CreditCards.com industry analyst Ted Rossman likens credit freeze to a state-of-the-art home security system which keeps the bad guys out, conversely, he equates credit monitering to text message you got from a neighbor after someone already smashed through your living room window and walked off with your big-screen TV. he observes that “In the latter case, the damage has already been done, so the alert isn’t all that helpful.”
Following the Equifax (EFX) data breach in September 2017, one in every five Americans chose to freeze their credit, resulting in a $1.4 billion credit freeze fee. “In the past, a credit freeze or security freeze, cost $3 to $10 per credit bureau,” explains Ashley Dull, editor in chief of CardRates.com. “It could cost up to $30 to freeze your credit with all three bureaus, with additional fees to unfreeze your credit.”
Fees for freezing or unfreezing credit reports were previously set at the state level. The new law, known as the Economic Growth, Regulatory Relief, and Consumer Protection Act, eliminates the fee requirement at all three major credit bureaus—Equifax, Experian, and TransUnion—across the country.
What’s changing for Credit freezes
“This legislation is a step in the right direction for protecting consumers’ identity,” says Dale Dabbs, president and CEO of Sontiq, the parent company of EZShield + IdentityForce. “It’s critical to have open access to your credit reports while also deciding who can see your credit information.”
In addition, the law includes a provision that allows parents to freeze their children’s credit reports for free if they are 16 or younger. 3 Identity theft in children can be easily overlooked if parents do not keep an eye out for the warning signs. “If you’re not vigilant regarding your own credit, chances are, you’re not thinking of someone stealing your toddler’s identity and racking up fraudulent charges,” Rossman says. “This could potentially go undetected for many years until they grow up and starts applying for credit, only to find a big mess.”
In 2017, over one million children were victims of identity theft, costing their families $540 million in out-of-pocket expenses. Sixty percent of children who were victims of identity theft were targeted by someone they knew. “These scenarios are a good reason to freeze your children’s credit file,” Dull says, “keeping their information safe with no cost to unlock it when they’re old enough to start using credit.”
Other ways to protect your credit
If you don’t want to pay for credit locking and a credit freeze seems too drastic, there are other things you can do to protect your identity and keep track of your credit information.
For example, don’t forget that you can obtain your credit reports for free once a year by visiting AnnualCreditReport.com. Examining your credit reports for errors or suspicious activity and reporting any that you find to the credit bureau can help you keep your good credit score.
Credit monitoring services are another option for protecting your credit. These companies monitor your credit reports for new activity and send you notifications when things like new credit lines or credit inquiries appear on your report. While this will not prevent anyone from accessing your credit history, it will keep you informed of who may be attempting to open accounts in your name. When comparing the best credit monitoring services, keep in mind that not all of them are free. Also, make sure you understand which credit reports are being monitored; some services will only look at one of your credit reports, while others will look at all three.
While free credit freezes aren’t a foolproof barrier against identity theft, they can help keep your information out of the hands of the wrong people. You can also fortify your defenses by checking your credit report on a regular basis, reviewing bank and credit card statements for unusual activity, and setting up bank and credit card alerts to notify you of new transactions. The more proactive you are in protecting your information, the better your chances of avoiding identity theft.
A credit freeze has no effect on an individual’s credit score. It is only a preventative measure and has no effect on a person’s credit profile. A credit freeze also does not prevent you from receiving your annual credit report, nor does it have any bearing on your ability to apply for a job, obtain insurance, or rent a home. Because prescreened credit offers are not covered by a credit freeze, you must make a separate request to stop receiving them by calling 888-5OPTOUT or submitting an online request.