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: