Your Basic Guide to Credit Freezes

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In Personal FinanceLendKey

Following the Equifax data breach in 2017, many customers started talking about the possibility of a credit freeze: a simple step they were hoping would prevent identity theft. Understanding how to perform a credit freeze, when you might want to perform one, and how to return your information to its normal state will help you navigate these often murky financial waters, better preparing you for future credit catastrophes.

What is a Credit Freeze?

During a credit freeze, you close off your credit accounts with the three key credit agencies. Thanks to the freeze, no one–specifically creditors–is able to access information based on your name and social security number. This helps prevent scam artists from using your social security number to open credit cards or secure other lines of credit, protecting you from identity theft and ensuring that your private information remains yours, rather than being used by someone else.

Why Freeze Your Credit?

The Equifax data breach is one example of a mass number of people turning to a credit freeze in order to help protect their personal financial data, but it’s not the only instance in which you might choose to freeze your credit. There are several personal instances that might cause you to want to freeze your credit or your spouse’s–or, potentially, both. Consider some of these situations.

Your tax return has bounced back, leaving you suspicious that someone has stolen your identity. You’ve filed your taxes as usual, expecting to get at least a minor return. Unfortunately, instead of a check, you got a warning from the IRS: someone else has already filed with your social security number. This is a red flag for identity theft, and it should be dealt with swiftly in order to prevent future complications! Freezing your credit will prevent fraudsters from opening future accounts in your name while you get your situation sorted out and ensure that you haven’t already been victimized–or that, if you have, you’re able to use your own identity again.

You’re worried that your social security number has been compromised. You’ve never been particularly worried about identity theft before, but recent awareness campaigns have left you wary. Unfortunately, you’re afraid that you may have been the victim of a scam: you accidentally provided your social security number to someone asking for it over the phone, you failed to protect critical information at the right time, or you know that you’ve accidentally left your private information somewhere that you shouldn’t have. If you’re worried, freezing your credit can help protect your private financial data until you’re able to sort things out.

You know someone has stolen your information in the past or used your name without your consent. Perhaps you have an unscrupulous relative who has taken out credit cards in your name or a so-called friend who has stolen your information in the past. Unfortunately, there’s no good way to prevent them from using that information again in the future, especially if they’ve managed to memorize it! Freezing your credit, however, is a surefire way to protect your credit and make sure that those individuals aren’t able to use it again in the future.

You’re simply concerned about privacy. In the aftermath of the Equifax breach, many people realized just how difficult it can be to maintain privacy and ensure that their identity won’t be stolen. If you’ve found yourself more concerned than ever about your personal privacy, turning to a credit freeze can help keep your private information exactly that long-term. While you’ll need to unfreeze your credit to make major purchases and for other normal life tasks, you may find that this simple strategy helps you keep track of your credit and ensures that you feel safer overall.

When Wouldn’t You Want to Freeze Your Credit?

If you’re concerned about identity theft in general, you might think that you should just keep your credit frozen all the time! Since the fees to freeze and unfreeze your credit are relatively low, this is a step that can be highly worthwhile to use long-term. However, there are some situations under which it might be more practical to wait to freeze your credit, especially if you’re interested in avoiding the fees that go along with freezing and unfreezing your information.

  • You know that you’re about to make a large purchase that will require access to your credit. This might include a home, a car, or other key information.
  • You’re about to take out a line of credit.
  • You’re about to move into a new location. Some landlords may run your credit report to be sure that you’re a good risk before they allow you to move in–and you don’t want to miss out on the perfect house or apartment due to a credit freeze!
  • You’re about to start a new job. Sometimes, new employers will want to check your credit or other critical information–and a credit freeze can substantially slow down that process.

While leaving your credit unfrozen is the easiest way to ensure that all of these agencies have access to your vital information, you should note that if you have already been the victim of identity theft, your information was acquired during the Equifax breach, or you’re suffering from other concerns, freezing your credit is well worth the extra effort expended. In many cases, you can lift the freeze temporarily or even for a single entity that you have authorized to access your information, which will allow you to easily and effectively use your own credit without worrying about compromising it. Note, too, that freezing your credit will have no negative impact on it–and could have substantial positive impact, since identity thieves will be unable to compromise your score!

How Do You Freeze Your Credit?

If you’re worried that your private information has been stolen or you want to prevent it from being stolen in the future, you’ll need to start with ensuring that you’re able to secure your credit with all three key credit reporting agencies: Equifax, Experian and TransUnion. You’ll contact each one, either by phone or over their website, to freeze your credit. It’s important to institute a credit freeze with each agency in order to ensure full protection.

Once you’ve contacted the agency, they’ll ask several questions to establish that you really are the owner of your identity. Next, they’ll put a freeze on your account and establish a PIN that you’ll use to unfreeze your credit if necessary. This PIN should be kept in a highly secure location, since it will be extremely difficult to unfreeze your credit without it. The PIN can also be used to refreeze your credit in the future if you need too.

Other Things You Need to Know

You’re thinking about freezing your credit, either because you’ve already experienced identity theft or because you’re afraid of the consequences if it happens to you.

Know the cost. While there have been movements to make freezing your credit free (and Equifax is offering free credit freezes until June of 2018 due to the data breach) it’s important to evaluate the cost from each state and each agency. Take a look at the current regulations. Each freeze may cost between $3 and $10 per agency. If you’re freezing credit for both yourself and your spouse and need to do it at each agency, that’s a number that can add up fast! You’ll also need to pay a fee to unfreeze your credit, and if you choose to freeze it again, the same fee will apply.

Expect delays. It’s not possible to simply turn your credit on and off in the blink of an eye–and unfortunately, you can’t always predict the times when you’re going to need it! If you need to scramble to get a job in a hurry or you need a fast loan to purchase a new car, for example, having a credit freeze in place may significantly slow things down. Make sure that you have a backup plan in place in these events so that you aren’t caught struggling during the wait.

Freezing your credit doesn’t impact existing lines of credit. If you have current credit cards or loans–or if someone else has taken those out in your name–they will continue to work as usual. Freezing your credit won’t close those accounts, so if you suspect that identity theft has already occurred, you will need to take further steps in order to ensure that those problems are taken care of.

You can “thaw” your credit temporarily. If you know you’re going to need to access your credit soon, it’s possible to temporarily lift the credit freeze and refreeze it again when you’re done. Note that this process will lead to fees, but it will also make it possible for you to easily get a loan for a specific task, get a new job, or take care of other responsibilities.

Knowing that identity theft is a very real possibility leaves many people struggling with how to handle it. While a credit freeze isn’t a perfect solution, it can help keep your identity and your credit where they belong: in your hands. By choosing to freeze your credit, you ensure that even if thieves do get their hands on your private information, they won’t be able to use it to open future lines of credit–and that will mean you’re in a better position to protect your confidential information and your credit score.