When Should I Freeze My Credit?

Matthew Frankel, CFP, Contributor, The Motley Fool
January 22, 2019

A credit freeze can be a great way to protect your information — along with the mark-free credit profiles of your children. From cyberattacks to connected smart toys, there are numerous ways thieves can access personal information and leave credit marks that could take years to remove. While a freeze isn't always necessary, knowing when to resort to this option can help ensure protection with suspicious activities.

A credit freeze makes it impossible for lenders and other creditors to access your credit reports and can be an excellent tool to combat identity theft and credit fraud. However, a credit freeze is a rather extreme step and can be quite a hassle, so it isn’t appropriate for everyone who is simply looking to protect their personal information.

With that in mind, here’s a rundown of what you need to know about freezing your credit, as well as an alternative way of keeping your identity safe that you may want to consider.

What is a credit freeze?

A credit freeze is an action you can take that can help protect you from identity theft.

In a nutshell, a credit freeze prevents anyone from accessing your credit report. So, if a lender attempts to run a credit check on you for loan approval purposes, they will not be able to see your credit report. The idea is that getting approved for a credit card, loan, or other type of credit account usually requires a hard credit inquiry from at least one of the three credit bureaus. By placing a freeze on your credit, this won’t be possible, and therefore new accounts cannot be opened in your name.

It’s also important to note that creditors won’t be able to obtain your credit score either since it’s based on the information contained in your credit report. For example, if a creditor tries to obtain your Equifax FICO® Score, they won’t be able to.

While a credit freeze prevents your report from being accessed for the purposes of opening new credit accounts, there are a few reasons your credit report can still be pulled if you have an active credit freeze. For example, you’ll still be able to access your own credit report. Your credit report can also be viewed as part of a background screening by a landlord, by collection agencies to whom you owe money, and for employment purposes, just to name a few.

How to freeze your credit

Freezing your credit is relatively easy to do. You can request a credit freeze online, by mail, or by phone. The only inconvenient part is that you need to request a credit freeze with each of the three credit bureaus individually. If you are going to freeze your credit, doing so with all three bureaus is a must, because certain lenders only check one or two of your three credit reports, so you need to be prepared.

So, to make the process a little easier here’s the current contact information for each credit bureau:

  • Experian: 1-888-EXPERIAN (1-888-397-3742) or visit Experian’s Freeze Center.

  • Equifax: 1-800-349-9960 or online on Equifax’s website.

  • TransUnion: 1-888-909-8872 or online on TransUnion’s website.

Until recently, freezing your credit used to cost money. And, you had to pay each credit bureau a fee that depended on what state you live in.

However, as of Sept. 21, 2018, that has changed. As part of the recently-passed bank de-regulation bill, all U.S. consumers are entitled to freeze (and unfreeze) their credit report for free.

Removing a credit freeze

After you place your credit freeze, you’ll be given a PIN that you’ll need to use to lift a credit freeze. You can lift your credit freeze (also known as “thawing” your credit) online or over the phone, and if you have your PIN, it’s a relatively painless process. According to Experian, if you do this, your credit will be unfrozen within an hour. Remember, however, that you’ll need to do this with each credit bureau individually.

Since it can be a somewhat time-consuming process from the time you initiate your first credit “thaw” until all three of your credit reports are actually unfrozen, it’s a smart idea to complete this process before you’re ready to apply for credit. In other words, don’t show up at an auto dealership to buy a car and then start the process of unfreezing your credit.

This is especially true if you’ve lost or forgotten your PIN, as the credit bureaus will need to take additional steps to verify your identity.

Pros and cons of freezing your credit

Like any financial decision, freezing your credit has both benefits and drawbacks. Here’s a quick rundown of the pros and cons of credit freezes that you need to take into consideration before freezing your credit report:

Pros:

  • Freezing your credit is perhaps the most effective way to prevent fraudulent accounts from being opened in your name.
  • Freezing your credit is now free.
  • A credit freeze will last for as long as you want it to. It won’t expire until you choose to remove it.

Cons:

  • The process of freezing your credit can be quite time-consuming since you need to do it with each credit bureau individually.
  • Unfreezing your credit requires a PIN, and if you forget or lose this PIN, the “thawing” process can be quite lengthy. You’ll need to unfreeze and then re-freeze your credit report every time you want to apply for new credit.
  • Freezing your credit does nothing to prevent or alert you of fraud on your existing credit accounts. For example, if a thief steals your physical credit card, a credit freeze does nothing to prevent fraudulent purchases from being made.

Using fraud alerts

If a credit freeze sounds like too much of a hassle and you are simply trying to protect your identity going forward, a fraud alert can be a good alternative to consider.

Instead of preventing creditors from accessing your credit report altogether, a fraud alert simply tells creditors that they need to take additional steps to verify your identity before opening an account. As an example, if you apply for a credit card and the creditor notices a fraud alert, they may request that you send a copy of your driver’s license before they’ll open an account in your name.

Fraud alerts are also free, and the same new law that made credit freezes free extended the term for an initial fraud alert from 90 days to 12 months. And, unlike credit freezes, you’ll only need to alert one of the three credit bureaus, and they’ll tell the other two.

If you’ve already been a victim of identity theft, you can also request a seven-year fraud alert by providing a police report or other proof of identity theft.

In a nutshell, if a credit freeze sounds like “too much” for your personal circumstances, a fraud alert can be a more flexible way to protect your identity.

When you should freeze your credit

To sum it up, a credit freeze is usually most appropriate if you have reason to believe that your identity has already been compromised. For example, if you notice a new inquiry on your credit report and don’t recognize it, or if you’ve been the victim of a data breach, freezing your credit can be a good proactive step to take before the problem gets any worse.

To be clear, a credit freeze may not solve all of your problems in these cases -- you’ll still need to take steps to close any new accounts that have already been opened in your name, for instance. You’ll also need to create an identity theft report at identitytheft.gov, which gives you certain rights when trying to clean up your credit and serves as proof that you’re an identity theft victim.

On the other hand, because of all of the drawbacks I just mentioned, a fraud alert might be a better first step if you simply want to reduce the possibility of identity theft but don’t have a specific reason to believe you’re about to be a victim.

The bottom line is that if you are already a victim of identity theft or have good reason to think you’re about to be, that’s when you should freeze your credit. 

This article was written by Matthew Frankel, CFP from The Motley Fool and was legally licensed through the NewsCred publisher network. 

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