Everything you need to know about a credit freeze

Apr 5, 2020

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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? Your fears aren’t unfounded. According to the 2019 Identity Fraud Report from Javelin Strategy & Research, 14.4 million people fell victim to identity theft, proof that this type of crime is far from rare.

(Photo by Andrew Bret Wallis via Getty Images)
(Photo by Andrew Bret Wallis via Getty Images)

There are ways to protect yourself from identity theft, though. One way? You can freeze your credit. Today we’re going to cover how to do just that and other questions you may have about credit freezes — like what it does it do to your credit and how to later unfreeze it.

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In This Post

What is a credit freeze?

A credit freeze prevents creditors from accessing your credit file, which also prevents you or others from opening an account in your name. Without access to your credit reporting file, creditors and lenders won’t be able to offer you any sort of credit.

Sometimes you’ll hear a credit freeze referred to as a security freeze, since it is a good measure of protection if you think your identity and personal information may have been compromised.

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. However, Lavelle said that this is the rarest type of fraud, and a freeze 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 — a far more common problem. 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 while 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, 2018 requires the credit bureaus to allow free credit freezes. In the past, TransUnion, Equifax and Experian charged for these freezes.

Related reading: How to check your credit score for absolutely free

How do I freeze my credit?

Initiating a credit freeze will help you avoid fraud and credit theft, but has it's drawbacks. (Photo via Shutterstock)
Initiating a credit freeze will help you avoid fraud and credit theft, but has its drawbacks. (Photo via Shutterstock)

To freeze your credit, you have to request freezes at all three credit bureaus. You can start the process online by contacting Equifax, Experian and TransUnion. You can also contact the companies by phone at the following numbers:

  • Equifax: 800-349-9960
  • Experian: 888-397-3742
  • TransUnion: 888-909-8872

Before you call them, be ready to provide personal information such as your name, address, date of birth and social security number.

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.

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.

Who can access frozen credit reports?

A credit freeze prevents new creditors from accessing your credit report. However, your credit will continue to be available to some entities, such as existing creditors or 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.

Related reading: How credit freezes and fraud alerts affect credit applications

When should I freeze my credit?

If you have reason to believe that your personal information has been compromised then you should initiate a credit freeze. Here are just a few instances that may warrant a credit freeze:

  • Your wallet has been stolen and contains personal identification information like a drivers license, passport, social security card and credit cards
  • You fall victim to a scam 
  • Your information was compromised during a data breach
  • You notice an unfamiliar credit inquiry on your credit report

In any of these cases, you should also file an identity theft report with the government, which will give you certain rights when it comes to cleaning up any damaged credit that wasn’t your doing.

Related reading: How to prevent credit card fraud

Does a credit freeze affect my credit score?

To answer that quickly, no. Your credit score is used to determine your creditworthiness and is based off your credit history from one of the three major consumer credit bureaus.

According to myfico.com, these next two mistakes will impact almost two-thirds of your credit score!
(Image courtesy of myfico.com)

For instance, FICO bases your credit score on these five factors:

  • Payment history. 35% of a FICO score is made up of your payment history. If you get behind in making loan payments, the longer and more recent the delinquency, the greater the negative impact on your credit score.
  • Amounts owed. 30% of your FICO score consists of the relative size of your current debt. In particular, your debt-to-credit ratio is the total of your debts divided by the total amount of credit that you’ve been extended across all accounts. Many people claim that it’s best to have a debt-to-credit ratio below 20%, but it’s not a magic number.
  • Length of credit history. 15% of your score is based on the average length of all accounts on your credit history. This becomes a significant factor for those who have very little credit history, such as young adults, recent immigrants and anyone who has largely avoided credit. It can also be a factor for people who open and close accounts within a very short period of time.
  • New credit. 10% of your credit score is determined by your most recent accounts. Having recently opened too many accounts will have a negative impact on your score, as the scoring models will interpret this as a sign of possible financial distress.
  • Credit mix. 10% of your score is related to how many different types of credit accounts you have such as mortgages, car loans, credit loans and store charge cards. While having a larger mix of credit is better than having less, no one recommends taking out unnecessary loans just to boost your credit score.

Learn more about how credit score works and what’s a good credit score by reading our guides.

Pros and cons of a credit freeze

A credit freeze is the most effective way to prevent fraudulent accounts being opened in your name — and considering its free to do, there’s no reason not to if you think your information has been compromised.

While a credit freeze will prevent others from stealing your identity and accessing your credit information, it will also prevent you from being able to open a new account while it is in place. Another drawback is that you will have to individually contact each agency to both freeze and unfreeze your credit, which is a bit tedious for those with busy schedules. Additionally, a credit freeze will not prevent or alert you of fraud on any existing accounts. Finally, if you lose or forget your unique PIN you were given during the initial credit freeze, you will have to unfreeze and re-freeze your account every time you want to apply for new credit.

What’s the difference between a credit freeze and fraud alert?

Robert Siciliano, security analyst with Redwood City, Calif.-based Hotspot Shield, a provider of virtual private networks, said that it’s important to understand that a credit freeze is different from a fraud alert, something that often confuses consumers.

A fraud alert, which is also free, puts a notice on your credit report telling credit card companies and lenders that you might have been a victim of identity theft. You only have to notify one of the bureaus to request a fraud alert. Once you do, that bureau will contact the other two and they, too, will place fraud alerts on your credit reports.

Once you have fraud alerts in place, businesses must verify your identity before they issue credit. Lenders and credit card companies might contact you before approving any requests for credit in your name.

Fraud alerts do provide some form of protection. But Siciliano says that placing a fraud alert is not a substitute for a credit freeze.

“A fraud alert only lasts for one year, and the bad guys can still access your credit file and apply for new credit,” Siciliano said. “This informs a creditor that you might have had your ID stolen, but they can, and do, still issue credit. It’s really just a false sense of security.”

How do I unfreeze my credit?

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.

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. As a reminder, here are the links and phone numbers:

You will need your unique PIN or password that was given during the initial credit freeze. When you call in to unfreeze your report for a temporary period, be sure to give them a specific time period or ask to lift it just for 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 only for the issuer that will be inquiring about your credit file.

Bottom line

Dave Sullivan, vice president of marketing with People Driven Credit Union in Lansing, Mich., said that while a credit freeze doesn’t prevent all forms of identity theft, it is still a useful tool for consumers looking for protection.

“A credit freeze is the only way to completely lock your credit file from criminals,” Sullivan said. “A credit freeze blocks all new inquiries for debt. The creditor gets no information back at all.”

Patti Black, a certified financial planner with Birmingham, Alabama-based Bridgeworth Financial, said that the 2017 Equifax data breach provided yet more evidence of how important it is for consumers to protect their personal information.

Black said that she has placed freezes on her own credit reports. The process was painless and quick. Black said it took about 30 minutes total for her to order freezes at all three bureaus.

“I strongly recommend that my clients freeze their credit reports,” she said. “A credit freeze is effective protection against identity theft.”

Further reading:

Additional reporting by Emily McNutt.

Featured photo by Getty Images.

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