How and Why to Freeze Your Credit

Written by Nickel - 7 Comments

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Identity theft is on the rise. According to the FTC, an estimated 8.3 million consumers fall victim to identity theft in the United States each and every year. While simple steps such as placing a fraud alert on your credit record can go along way to protect you against financial identity theft, you have an even stronger tool at your disposal… The credit freeze.

What’s a credit freeze?

A credit freeze (a.k.a., a “security freeze”) allows an individual to lock their data at the major credit bureaus, meaning that it’s virtually impossible for an identity thief to do anything in your name that requires a credit report. The credit freeze concept has its roots in a 2003 California state law which caused many other states (40 at last count) to pass credit freeze laws of their own. As of late 2007, however, all three major credit bureaus began voluntarily credit freezes regardless of your state of residency.

Once you place a credit freeze, you’ll receive a personal identification number or password that can be used to temporarily lift or completely remove the freeze. While a credit freeze prevents the credit bureaus from releasing your information without your authorization, enitites with which you have an account (or collection agencies acting on their behalf) are exempt from these limitations.

The downside of freezing your credit

While credit freezes are for more effective than fraud alerts, which are actually ignored by some creditors, they’re not without their drawbacks. For example, while a credit freeze will stop new account applications in their tracks, it won’t do anything about existing accounts that have been compromised. Thus, if your credit cards are lost or stolen, you’re out of luck.

In addition, because a credit freeze completely prevents access to your credit report, having one in place can delay or prevent the approval of all kinds of applications. Given that your credit report is used for far more than just extending credit, this can be quite an inconvenience. If you go down this road, be forewarned that you might need a few days of lead time to unlock your credit report.

Another inconvenience is that a credit freeze will prevent automatic updates to your name or address. Thus, if either of these things change while you have a credit freeze in place, you’ll need to manually update this information with the credit bureaus.

The final downside is cost. For states without a credit freeze law, the default fees are $10 to place, temporarily lift, or completely remove a credit freeze. While many states mandate lower fees, it’s not necessarily cheap to do this, particularly if you envision needing to unlock your credit report frequently. This is especially true given that you have to lock/unlock your report at the different credit bureaus individually.

The good news is that, if you’re a victim of identity theft (and can prove it), then you can freeze and unfreeze your credit for free.

How can I freeze my credit?

So… You’ve read through this and you’ve decided that you want to freeze your credit. How do you go about doing it? Since the details vary from one bureau to the next, I figured it would be easiest to just link to the pertinent pages at each:

Photo Credit: weirdvis

Published on July 18th, 2008 - 7 Comments
Filed under: Credit Cards, Identity Theft
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About the author: Nickel is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

Comments (scroll down to add your own):

I’m glad that you brought this up! Many people do not realize that there is a difference between credit freezes and fraud alerts!

IMO credit freezes should only be initiated when you feel the threat of identity theft is imminent and in most cases a fraud victim alert will be adequate.

In the case of Todd Davis (of Lifelock Fame) his ID was stolen because the pay day loan company never even checked his credit report before issuing a loan to someone claiming to be him. In this case, not even the freeze would of prevented this theft.
Comment by Benjamin — Jul 18th 2008 @ 8:22 am
Great article! Will have to save this info in case we have problems.
Thanks.
Comment by jay — Jul 18th 2008 @ 4:00 pm
Pretty close, but I wanted to comment on your “disadvantages” section:

The fact that freezes don’t help with existing fraud or credit card breaches is a limitation, not a drawback.

While it’s true that having a freeze will delay authorized access to your credit, many states have implemented a time limit on how long a credit reporting company has to thaw your credit. Some require a simple process that takes 15 minutes or less via phone or Internet. Since all three credit report companies have to comply with state laws that means the capability to thaw quickly is there (and if they don’t offer it in your state, then you should file a complaint for them artificially making the process difficult to discourage people from signing up).

I don’t really see the automatic update of name and address as a problem. They usually get it wrong and maybe they’ll finally stop adding addresses I’ve never lived at.

And lastly, while it could cost you up to $10 per company to freeze, you only need to thaw for one. If you go to a Verizon store and want a cellphone, ask them which company they use and thaw for just that one. Also, most states offer lower fees (and smart states will implement laws soon to do so as well).
Comment by Jeremy Duffy — Jul 21st 2008 @ 8:37 am
It’s appalling that the consumer is the last to have a say on whether they want this information collected on them and reported. The credit bureaus have become secondary governing bodies which severely limit opportunity for people working towards a fresh start. They are un-American in the forceful way they stratify people into classes based on previous financial failures. It’s sickening that you should have to PAY to not be tracked and hunted like a dog by these financial industry henchmen. Credit bureaus now determine if people can obtain rental housing or certain jobs. They determine your insurance rates and your cost of borrowing. So exactly what is the purpose of the credit bureau, if not to verify responsible behavior? Because, foreclosures, evictions and credit card defaults are at an all time high. So obviously credit reports have done nothing to protect lenders. However, the EFFECT of the the credit bureau is to assign you to a certain class within society and to undermine your ability to recover from mistakes and misfortune.

Perhaps when words like “Communist” are thrown around in America, a closer look should be taken at the credit reporting agencies that spy and report on Americans for profit.
Comment by Ettringer Media — Jul 28th 2009 @ 11:07 am
Ettringer Media is my new hero. You couldn’t be more right.
Comment by Jeremy Duffy — Aug 6th 2009 @ 1:53 pm
Here is the current TransUnion link for security freezes. Thank you for this great info
https://annualcreditreport.transunion.com/fa/securityFreeze/landing
Comment by CoachLaura — Aug 28th 2009 @ 3:35 am
I have no problem with credit companies as long as there is a way to completely opt out of credit reporting. That would mean that I have the option to stop all collection and reporting of my personal information or limit what may be collected and disclosed.
Comment by Bob — Sep 18th 2009 @ 11:25 am

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