If you are worried about identity theft or data breaches, putting a freeze on your credit may be a good option to save your credit score. We live in a day and age where criminals are accessing and using our financial information to steal. As identity theft continues to rise, it is smart to monitor your credit report and to keep your credit safe. Watch for news reports about breaches or you may receive a notice from your credit card company.
But before you take action and freeze your credit report, you should understand more about why and how.
What is a credit freeze?
A credit freeze, also known as a security freeze, will prevent potential lenders from accessing your credit report. More importantly, it will prevent thieves from opening accounts fraudulently in your name.
When you freeze your credit report, you are essentially restricting access to any of your personal financial data. Therefore, if someone maliciously attempts to use your personal information to apply for new credit, the application would fail as the lender would be unable to access your credit report and credit score. Note that your current creditors, some government agencies (i.e. child support agencies), and any crediting monitoring service still will have needed access to your credit.
Thanks to legislation passed in 2018, (Economic Growth, Regulatory Relief, and Consumer Protection Act), freezing and unfreezing your credit at each of the three bureaus (Equifax, Experian, and TransUnion) is free of charge.
How do you freeze your credit at each credit agency?
In order to freeze your credit, as the consumer, you must notify all three major credit bureaus. In order to verify your
- Equifax: Call 800-685-1111 or visit their website.
- Experian: Call 888‑397‑3742 or visit their website.
- TransUnion: Call 888-909-8872 or visit their website.
Whether you make your freeze request online or by phone, the credit bureau must implement the freeze within one business day. When you ask to remove the freeze, the bureau must do so even quicker. If you request a freeze or release of information by mail, the bureau has three business days to complete either request.
If you find yourself considering freezing your credit, know that this is the strongest action available. The federal government oversees the process of freezing and releasing your credit information. You are protected legally. It’s the right thing to do to protect your credit if you believe your credit information has been disclosed inappropriately. There are signs to look for such as being denied credit or errors on your credit report. A freeze is free and can be removed at any point.
Be wary that a freeze doesn’t absolutely prevent financial loss.
In the event of a data breach of your credit card information, be aware that a credit freeze does not fix all issues. A credit freeze cannot prevent financial loss. While it does prevent opening of future credit cards any fraudulent charges made on your breached credit card will not go away. Make sure you are careful in watching your credit card statements. If you have any suspicion, you should contact your credit card company to discuss closing the account. Acting early can help prevent losing money and your credit score from being intact.
Freezing verses Locking and Fraud Alert
There are other options you can consider offered privately by the individual credit bureaus. These alternatives may be good if you are looking for preventative ways to protect your financial data.
One option is to lock your credit. All three bureaus offer this (either at no cost or with a fee). With a lock, the process of obstructing and restoring access to your credit information is simple. Like a freeze, you’ll need to set it up individually with the credit agencies. Equifax offers a lock for free. Their service agreement also does not contain an arbitration clause or class-action waiver which means if there is a mistake made, you can still pursue it legally. In light of their historical data breach, Equifax is trying to regain trust with consumers. Transunion also offers locks at no cost to consumers but know that their service agreement includes an arbitration clause and class-action waiver. Likewise, Experian offers a lock but they bundle it with their identity theft package which does have a price.
Another possibility that may be offered by the agencies is called a fraud alert. Here, the credit reporting agency puts a warning on your credit report that alerts lenders. It requires them to verify your identity before opening a new account, adding credit cards or increasing the credit limit on your account. This is probably the least beneficial option as you are trusting the agencies to alert lenders and creditors to then scrutinize applications in your name.
Do freezes or locks affect your credit score?
No, we are happy to say that freezing your credit as well as removing the freeze does not affect your credit rating or hurt
If you need to freeze your credit, it is not difficult and you can usually do it by phone or online in little time. Keep a watch on your credit report and score and be aware of the news reports on one of your creditors potentially having a breach of data. Additionally, watch for creditor notices in the mail and watch your credit card statements for suspicious activity. If you act quickly and freeze your credit, you have taken a crucial step in salvaging your credit.