Credit Freeze 101: Should I Freeze My Credit?

Should i freeze my credit

Have you wondered, "Should I freeze my credit?". Well, 14.4 million Americans were victims of identity theft in 2018. And the single most common method of identity theft involves the thief opening a new credit account in the victim’s name. Unfortunately, there’s no way to fully protect against identity theft.

If you have a Social Security number, you run the risk of someone using it for their own personal gain. But the federal government has tools in place, including credit freezes, to help Americans secure their finances.

 

What is a credit freeze?

A credit freeze — also known as a security freeze — is a tool that restricts access to your credit report. Credit freezes are designed to prevent identity theft, as people won’t be able to open new credit accounts using your name and Social Security number.

Credit freezes are often used to help prevent or respond to identity theft. Some people choose to leave their credit frozen all the time, only unfreezing it when they want to apply for credit. Others may freeze their credit when someone has already accessed their private information to prevent them from opening new accounts.

 

What happens when you freeze your credit?

When you freeze your credit, lenders can’t run credit checks. The credit bureau TransUnion describes a credit freeze as having a padlock on your credit report. Whenever the lock is engaged (aka your credit is frozen), lenders can’t access it. And when lenders can’t run a credit check, they can’t extend a new credit line. Only when you decide to “thaw” your credit will lenders be able to access it again.

 

Should I freeze my credit? Pros and Cons

Before initiating a credit freeze, it’s important to understand the implications. While there are plenty of advantages to freezing your credit, there are also some downsides to keep in mind.

Pros

Your risk of identity theft is reduced

The primary benefit of credit freezes is that they prevent someone else from opening a credit account with your information. This in turn helps to reduce the risk of identity theft.

It doesn’t cost anything

It used to be that credit freezes came with a fee. But now, all three credit bureaus allow you to put one in place for free. your credit for free.

Your credit score won't be impacted

According to the Federal Trade Commission, a credit freeze has no impact on your credit score. It also doesn’t prevent you from checking your credit report.

A credit freeze does not expire

Once you freeze your credit, you can leave it until you’re ready to unfreeze it. Freezes don’t expire, so you won’t have to update or re-freeze often.

It prevents impulse decisions

Credit freezes are primarily intended to prevent identity theft. But they can also help prevent you from impulsively opening new credit accounts.

Cons

They aren’t 100% effective

A credit freeze doesn’t prevent someone from ever opening another account. Assuming you unfreeze your credit eventually, someone who has your personal information could still do damage.

Existing accounts are not protected

Credit freezes prevent people from opening new credit accounts with your information. But they don’t prevent someone from using your current credit accounts nefariously.

You need to freeze your credit with each agency separately

There’s no way to freeze your credit with every agency at once. Instead, you have to go through the process with each of the three credit bureaus separately.

You need to plan ahead for new credit accounts

Anytime you need to apply for credit, you’ll have to unfreeze your credit. It could require some planning ahead. You may even have to plan ahead to purchase insurance, as insurance companies typically run your credit to determine your rates.

 

How to freeze your credit

To freeze your credit, contact each of the three bureaus, Equifax, Experian, and TransUnion:

To initiate the freeze, you’ll need to share your name, address, date of birth, and Social Security number. You’ll also get a unique PIN or password, which you’ll need to provide when you choose to lift the freeze.

 

How to unfreeze your credit

A freeze remains in place until you decide to lift it. To do so, you’ll need the PIN or password that you established when you initially froze your credit.

To unfreeze your credit, contact each bureau and request that they lift the freeze. If you make the request by phone or online, the credit bureau must lift the freeze within one hour. You can also make the request by mail, in which case the bureau has to lift the freeze within three days of receiving the request. Just like initiating a credit freeze, lifting one is free.

In some cases, you may only need to unfreeze your credit at one or two bureaus. When you apply for credit, a job, or an insurance policy, you can ask which specific bureaus they plan to use to check your credit. Then, you can just lift the freeze at those specific bureaus.

 

Credit freeze alternatives

A credit freeze can be a useful tool to prevent your identity, but it’s not entirely effective at protecting against identity theft. Additionally, people who apply for credit often may find it to be inconvenient. There are a few options you can use instead of or in addition to a credit freeze.

Credit monitoring service

Many credit services monitor your credit report and alert you to changes in your credit score and changes to your credit report. Because of the quick response, these services can help spot any potential identity theft early. Many companies like Credit Karma offer this service for free, while others charge a fee.

Fraud alert

A fraud alert is a tool that makes it more difficult for someone to open credit accounts in your name. It requires lenders to call you and verify your identity before extended credit. That way, you’ll know if someone other than you tries to open an account in your name.

To initiate a fraud alert, simply call one of the credit bureaus — they’re required to notify the other two. It will be free of charge, and remain valid for one year.

Federal law also allows victims of identity theft to receive extended fraud alerts for seven years after the incident. An extended fraud alert makes it more difficult for businesses to extend credit to you — they must take extra steps to verify your identity and must remove your name from all credit marketing lists.

Regular credit checks

Regularly checking your credit report allows you to make sure there’s nothing on your report that shouldn’t be. You can check to make sure there are no signs of identity theft and that there are no errors. Federal law guarantees that everyone can access their full credit report at least once per year at AnnualCreditReport.com.

 

The bottom line

Identity theft affects millions of Americans each year and is a concern for many people. Victims of identity theft often spend years trying to recover, both financially and emotionally. A credit freeze is just one step in helping to prevent identity theft. But remember that’s it doesn’t fully protect you, so it’s important to pair a credit freeze with other tools available.

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