Everything you need to know about freezing your credit

Over the last decade, we have seen far too many data breaches put consumer information at risk. That most recent debacle was the Equifax data breach of 2017, which released the sensitive personal information of up to 143 million Americans to hackers and thieves.

According to Equifax, the breach lasted for 4 months. During that time, hackers accessed Social Security numbers, birth dates, addresses, and even driver’s license numbers in some cases. They also stole approximately 209,000 credit card numbers and important documents with identifying information from 182,000 people.

If that’s not enough to make you worry about identity theft, perhaps nothing will. Fortunately, there is something you can do to protect your personal information, credit information, and identity from hackers. You can freeze your credit, and thanks to a new law, doing so is free.

How a security freeze works

A credit freeze is a security measure that you can take to protect your credit report from unauthorized access. When you freeze your credit, lenders and other businesses will not be able to see your credit report without your permission. This can help to prevent identity thieves from opening new accounts in your name.

To freeze your credit, you need to contact each of the three major credit bureaus: Equifax, Experian, and TransUnion. You can do this online, by phone, or by mail. Fortunately, a new federal law dictates that people can freeze and unfreeze their credit at the three major credit bureaus with no charge starting September 21, 2018. The new law also extends fraud alerts made on your account from 90 days to one year.

Once you have frozen your credit, you will receive a PIN. You will need this PIN to unfreeze your credit when you are ready to apply for a loan or credit card.

Here are some of the benefits of freezing your credit:

  • It can help to protect you from identity theft.
  • It can make it more difficult for someone to open new accounts in your name.
  • It can help to prevent fraud.
  • It can give you peace of mind knowing that your credit report is safe.

Here are some of the drawbacks of freezing your credit:

  • It can make it more difficult to apply for loans and credit cards.
  • You will need to remember your PIN to unfreeze your credit.
  • You will need to contact each of the three major credit bureaus to freeze and unfreeze your credit.

When should you freeze your credit?

You should consider freezing your credit if:

  • You have been the victim of identity theft.
  • You have lost your wallet or purse.
  • You have had your personal information compromised, such as in a data breach.
  • You are planning to travel and are concerned about your credit report being accessed without your permission.

How to unfreeze your credit

To unfreeze your credit, you need to contact each of the three major credit bureaus. You can do this online, by phone, or by mail. You will need to provide your name, address, and PIN.

Here are some additional tips for freezing your credit:

  • Write down your PIN and store it in a safe place.
  • Keep track of when your credit is frozen and unfrozen.
  • Consider freezing the credit of your children and other dependents.
  • Review your credit reports regularly for any unauthorized activity.

Freezing your credit is a simple way to protect your credit report from unauthorized access. It can be a good idea to freeze your credit, especially if you are concerned about identity theft or fraud.

When you go to apply for new credit, lenders access your credit report from the credit bureaus to assess your credit worthiness. When you place a security freeze on your credit report, however, lenders are rendered unable to access your credit report or your credit score unless you’ve given specific permission for them to do so.

The main goal of a credit freeze is ensuring identity thieves cannot open new accounts in your name. With that in mind, these security freezes allow you to create a PIN number you can use to temporarily unfreeze your credit report if you need to apply for credit — for example, if you needed to apply for a home loan or car loan.

The good news about security freezes is that they do not impact your existing lines of credit. Even if you freeze your credit with the credit bureaus, you will be able to continue using open lines of credit and credit cards as normal. It’s also important to note that freezing your credit report has no impact on your credit score — the three-digit number that denotes your credit health.

However, a security freeze isn’t an end-all-be-all solution since creditors and lenders you already have accounts with can access your report and score without a PIN number. Some government agencies, including some law enforcement agencies, can also access your credit details during a freeze.

Why should you freeze your credit?

While you may not feel you are at threat for identity theft or other hacking methods, you may want to freeze your credit anyway. Doing so ensures that nobody can open an account and borrow money in your name. Not only can preventing this type of theft save you from financial consequences that result from identity theft, but it can save you from the stress it causes as well.

All adults should consider freezing their credit, but you consider the prospect even further if:

  • Your credit card details have been stolen in the past.
  • You are a past victim of identity theft.
  • You don’t plan to apply for new credit.
  • You prefer to prevent identity theft before it happens.

Pros and cons to consider

While freezing your credit can protect you from having your identity stolen, there are still pros and cons to consider. Before you freeze your credit, make sure you understand the benefits and the consequences:

Advantages of freezing your credit:

  • No one will be able to open an account in your name without your PIN number and additional identifying information.
  • You can continue using existing credit card accounts as usual.
  • Freezing your credit does not have a negative impact on your credit score.

Disadvantages of freezing your credit:

  • You’ll need to take the time to freeze your credit with all three credit reporting agencies.
  • If you want to apply for new credit, you will need to use your PIN number to temporarily unfreeze your credit first.
  • If you open new credit cards or lines of credit frequently, the extra steps required to unfreeze your credit report could be inconvenient.

The bottom line

At the end of the day, placing a security freeze on your credit is a smart way to prevent identity theft before it starts. You will need to spend a few minutes on the computer to enter your information, but the peace of mind you gain will be well worth it.

DMCC is a 501 (c)3 nonprofit organization committed to educating consumers on financial issues and providing personal assistance to consumers who have become overextended with debt.  Education is provided free of charge to consumers, as well as personal counseling to identify the best options for the repayment of their debt. To speak to a certified credit counselor, call toll-free 866-618-3328 or email contact@dmcconline.org.DMCC is located at 1330 SE 4th Ave, Suite F, Fort Lauderdale, FL 33316.