If you have been a victim of credit card fraud or identity theft, you have several courses of action to limit the damage and add a layer of protection to your account, including a credit freeze. But what is a credit freeze, and what are the pros and cons of applying one?
In simple terms, a credit freeze cuts off access to your credit report to new creditors. (Existing creditors and their debt collectors, as well as government agencies, can still access your file.). If identity thieves try to open fraudulent accounts in your name, the creditor will be unable to pull your file and will be far less likely be able to approve the new account.
A credit freeze does not affect your current credit card accounts — you can use them as you normally would. However, when you legitimately want to open a new account for yourself or give a creditor access to your information, you will need to lift the credit freeze temporarily.
Is a credit freeze the best options for you? Consider these pros and cons of applying one to your account.
- Sense of Security – If your identity has been stolen, you have a long road ahead to restore the damage — but at least you can rest assured that your information would not be used to open new accounts.
- Preemptive Action – When you do not have any evidence of identity theft but have reason to expect thieves may strike — for example, if you have lost your wallet, or your information was compromised in a known security breach — a credit freeze can prevent potential damage through erroneous accounts. Of course, you will have to cancel your current credit accounts and have them reissued in the case of a missing wallet, so take care of that step first.
- Inconvenience – The need to "freeze, thaw, and re-freeze" your account to open new accounts or apply for loans can be a hassle, especially because you need to do so with all three of the major credit bureaus (TransUnion, Equifax, and Experian). However, that is not an issue if you are older and at a more stable point in life where you don't need to open or change accounts frequently and you just need to protect the ones that you already have.
- Incomplete Protection – While a credit freeze does make it more difficult for a thief to open up a credit account with your stolen information, it does not cover all aspects of fraud. Anyone who steals your existing account information can rack up fraudulent charges on that account.
If you do decide to enact a credit freeze, you will need to do so with each of the three major credit bureaus. All three allow you to do so online, by phone, or via certified mail. Each bureau's website contains further instructions on how to apply and lift a freeze within that agency. A PIN is often issued to you as a security measure to allow you to manage your credit freeze.
As of September 21, 2018, the federal Economic Growth, Regulatory Relief, and Consumer Protection Act has made it free to freeze and unfreeze your credit file and those of your children. Previously, there was a one-time cost associated with a credit freeze, except for victims of identity theft. Now, if you submit your request for a credit freeze via telephone or electronic means, the credit bureau must activate the freeze within one business day. If your request was by mail, the credit bureau has up to three business days after receiving it to freeze your file. The amount of time the freeze is in effect varies by state — some states have indefinite limits, others set a specific number of years. Make sure that you understand the rules for your state. You can request that the freeze be lifted free of charge. You can also ask for your credit to be unfrozen temporarily if you need to apply for more credit, such as an auto loan or a mortgage.
Weigh the pros and cons, and decide whether a credit freeze is right for you — although we hope you never have to do so because of identity theft.
If you would like to prevent identity theft, check out our credit monitoring service.