Important Things You Need to Know Before Freezing Your Credit

Posted by mariojones on February 13th, 2020

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In the aftermath of the recent Equifax data breach, which resulted in a data leak impacting 143 million Americans, some data security experts are recommending that consumers freeze their credit.

A security freeze will prevent potential lenders from accessing your credit report, stopping a thief from opening an account or getting credit even if they have your personal information.

Even so, you need to know what's at stake before you decide on a credit freeze. Given the severity and pervasiveness of the Equifax breach, experts say consumers should get their ducks in a row first, to gain maximum leverage from putting their credit on ice.

Are you worried that cybercriminals will steal your identity to open a credit card account in your name? Or maybe you fear that a hacker will use your information to take out a payday loan in your name.

When you freeze your credit, you prevent lenders and creditors from accessing your credit reports. If a hacker steals your Social Security number or other personal information and tries to open a new credit card account in your name, the company behind that card won’t be able to access your three credit reports, one each maintained by the national credit bureaus of Experian, Equifax and TransUnion. This means that they won’t be able to open a new account in your name.

What does it mean to “freeze” your credit?

A credit freeze is a service provided by the three major credit reporting agencies that will allow you to restrict access to your credit report. How does this help me you may be asking? When opening a new credit account, most (not all) creditors need to see your credit report before they will approve opening up a new account.a credit card company does a credit check, they’re accessing your report to see if you’re creditworthy. So you are limiting access to your credit report from any outside person or company by placing a credit freeze on your information.

Here Are the Seven Steps You Need to Take Before Freezing Your Credit:

1. Know What a Credit Freeze Is

By and large, when you freeze your credit report, you are stopping any of your personal data from being reported to lenders and creditors. Thus, in the event that a fraudster would try to use your Social Security number to apply for a credit card, that application would be rejected, as the bank would be unable to verify your credit score.

2. Understand the Credit Freeze Process

The path to a credit freeze involves informing all three major credit bureaus. "Each bureau will ask you to answer several questions to validate your identity, and you'll get a PIN code that you can use to freeze and unfreeze your credit report, as needed," Clements says. If you forget your PIN, you'll need to contact the bureau to verify your identity, and reset your account access with a new PIN.

3. Freezes Are Now Free

There is no longer a cost to freeze or unfreeze your credit report thanks to the recently enacted Economic Growth, Regulatory Relief, and Consumer Protection Act. Credit freezes are now free in all states, for both placing the initial credit freeze as well as "thawing" or lifting the credit freeze, either temporarily or permanently.

4. A Freeze Doesn't Protect Everything

In the event your credit card number falls into a fraudster's hands after a data breach, know that a credit freeze won't help. "A credit freeze does not prevent financial loss in that event," says Leslie Tayne, owner of Tayne Law Group in New York City.

5. Expect Credit Delays with a Freeze

Credit freezes can create delays and problems when credit is needed quickly in the case of applying for a loan, credit card, or even a job hunt, says Tayne. "During a freeze period, most companies will not extend credit until they check one's credit file with one or three major credit bureaus, and that takes time" she explains.

A better, alternative avenue to a credit freeze may be to sign up for a fraud alert, says Tayne. "That's where a credit reporting agency puts a warning on consumers' credit reports, alerting potential lenders to verify the identity of anyone attempting to open an account in a consumer's name," she notes. "That way, a credit reporting firm can make validate the legitimate credit applicant before granting any credit."

6. Stay Vigilant

Even if you do get a credit freeze, make sure to check your financial statements regularly, says Sage Singleton, a safety and security expert at SafeWise, a home security and safety firm.

What a Credit Freeze Can Do?

Justin Lavelle, chief communications officer with New York City-based BeenVerified.com, an online provider of background checks, said that freezes are effective ways to prevent thieves from opening a new account in your name. Lavelle said that this, though, is the rarest type of fraud, and will still leave you open to other forms of identity theft.

“A credit freeze will not prevent a thief or hacker from using your current accounts,” Lavelle said.

And that is a far more common form of identity theft. A hacker can cause plenty of damage by using your personal information to access your favorite rewards card account or your checking account, and a credit freeze won’t stop this.

This doesn’t mean that you shouldn’t freeze your credit. After all, a freeze is free, simple to request, has no impact on your credit score and will protect you from one type of identity theft.

The downside? If you do want to apply for a new credit card or loan, you can’t do it if your freeze is in place. You’ll have to remove your freeze first. Fortunately, that’s free, too. A federal law that went into effect Sept. 21 requires the credit bureaus to allow free credit freezes. In the past, TransUnion, Equifax, and Experian charged for these freezes.

Initiating a Credit Freeze

You still must request freezes at all three credit bureaus. You can start the process online by contacting Equifax, Experian, and TransUnion. You can also contact them by phone at the following numbers:

The bureaus are required to freeze your credit reports within one business day. Once you’ve requested a freeze, each agency will send you a confirmation letter with a unique PIN or password. It’s vital that you keep the PIN or password in a safe space, as it’ll be needed when you want to unfreeze your report.

If you want to unfreeze your reports say you want to apply for a mortgage loan or new credit card you’ll again have to contact the each of the three agencies individually. Once you request this, the bureaus must lift your freeze within one hour.

When you call in to unfreeze your report for a temporary period, be sure to give them a specific time period or lift it to a specific party. Say, for example, you want to open a new credit card. If possible, contact the issuer to ask which agency (or agencies) it pulls your credit information from. Then, ideally, you’ll be able to call that credit agency (or agencies) and unfreeze your report for either a period of time or for the issuer that will be inquiring about your credit file.

Some other helpful information about credit freezes includes the fact that you won’t stop receiving prescreened credit card offers, unless you opt out by calling 888-567-8688. In addition, while your report is frozen, your credit will continue to be available to some entities. For example, your report can be released to your existing creditors or to debt collectors acting on their behalf. In addition, government agencies may have access in response to a court or administrative order, a subpoena or a search warrant.

Thinking in the long term, when does your credit freeze end? In a few states, your credit freeze will automatically expire after seven years. In most cases, however, your freeze will remain in place until you ask the credit reporting agency for it to be removed.

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