Freezing your credit can be an ideal way to help prevent identity fraud.
Here’s how it works. The three main credit bureaus – Experian, Equifax, and Transunion – hold your credit history, including your credit score and details on your history managing credit.
Typically, a lender or company can make a “hard inquiry” and request that information about you. For example, if you are applying for a mortgage, loan or credit card, the bank may require that you provide your official credit history.
Or, if you are applying for a job, your potential employer also may pull this information.
With a credit freeze, you can have some control over who can access your financial information. In this case, any company or bank wanting to get your information from the three main credit bureaus would have to have a PIN from you.
If you think you’ve been a victim of identity theft, you should strongly consider freezing your credit. That way, criminals will have a more difficult time opening new accounts or getting new loans in your name.
Identity theft combined with credit card fraud can wreak havoc on your financial health for years.
How to Freeze Your Credit
It’s fairly easy to freeze your credit. First, you call each of the three main credit bureaus, or contact them via their website:
- Equifax: 1-800-349-9960
- Experian: 1-888-397-3742
- TransUnion: 1-888-909-8872
You will likely need to provide the bureaus with your personal information like your Social Security, address and birthday to confirm your identity. For minors, parents or legal guardians can freeze a child’s credit.
Then, continue to monitor your credit history for any unusual activity.
Just know that freezing your credit doesn’t mean that you are safe from identity theft. Criminals who get ahold of your personal information may be able to access your current credit, and rack up charges under your name.
So, if you believe someone has gotten your information, report this to your current credit card companies and lenders as well. You should do this even if you don’t take the step of actually freezing your credit.
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Is There a Downside to Freezing Your Credit?
You should consider the potential downsides to freezing your credit before you make the move. Mainly, having a credit freeze can make it more cumbersome to apply for financial products like credit cards, mortgages or loans. You could get denied a loan, credit card or mortgage if your lender does not have your PIN.
Otherwise, freezing your credit has no other major downsides. It does not affect your credit score. And lender don’t look at a credit freeze negatively when they are deciding whether to approve you for loans or credit cards.
And, while potential lenders will not be able to access your financial information without a PIN, your current lenders and creditors will still have access to it. You will also still be able to see your credit information yourself.
So, the only major downside is that getting loans and such may require a few extra steps.
How Long do Credit Freezes Last?
Your credit freeze could last for as much as seven years if you don’t request to have your credit unfrozen. You can request to have it removed at any time.
To have a credit freeze lifted, call each of the three credit bureaus and provide them with your PIN or password. You can have the freeze removed either temporarily or permanently.
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Credit Lock Vs. Credit Freeze Vs. Credit Card Block
In addition to a credit freeze, you can also try to protect your finances with a credit lock or a credit card block.
A credit lock is similar to a credit freeze in that it prevents potential lenders from accessing your financial information without a PIN that you provide.
However, with a credit lock, you can more easily turn and off the freeze, such as through an app. Locking services typically cost money, whereas the credit buraus must provide a credit freeze for free.
Now, with a credit card block, you do not have to contact the credit bureaus. You should use a credit card block if your credit card has been lost or stolen.
In this case, you would contact your credit card company to stop all purchases on a particular credit card. They would then issue you a new credit card.
How to Protect Your Financial Identity
Freezing your credit is indeed one way to try to safeguard your finances from fraud. There are also many other ways to reduce the threat of identity theft that may be more convenient if you don’t think you’re in immediate danger of having someone open a new account under your name.
The first way is to routinely check your financial statements for any signs of unusual activity. Some credit cards will alert you if there are out-of-the-ordinary purchases.
You can also get a annual credit report from each of the three credit bureaus. You can get one report per year for free through AnnualCreditReport.com.
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The Bottom Line
Freezing your credit can be a wise financial decision to protect your information, especially if you believe you’ve been the victim of identity fraud. Having a credit freeze in this case can both save you from more potential costly fraud and help keep your credit score intact.
For most people, putting a freeze on your credit may be more hassle than it is worth because getting, say a new car loan or a credit card, becomes more difficult.
If you just want to protect your financial information, there are other ways to do it that are less involved than freezing your credit, such as regularly monitoring your credit reports and bank statements.
Consider all the pros and cons before deciding whether or not to put a freeze on your own credit.
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