Credit Freeze: Pros and Cons {That The Credit Bureaus Won’t Tell You}


By Raven Stewart / Posted: Apr 3, 2019 / 0 Comments / Posted in Loan Tips

How to Freeze Your Credit Report - Pros and Cons
Have you had your data compromised in a hack? There was a time when such financial misadventures were rare, but by now, they have become disturbingly commonplace. Most people have probably had their information stolen in a breach by this point at least once, if not more than once.

If you have been so unfortunate, there’s a good chance that someone has advised you at some point or another to consider getting a credit freeze.

What is a Credit Freeze?

But what is a credit freeze? Will it really protect you? Or will it just make your financial needs even more complicated? In this article, we will go into the advantages and disadvantages of credit freezes in detail. That way, you can make an informed choice as a consumer.

First, let’s go over the credit freeze definition. When you freeze your credit, technically, you’re freezing your credit reports from being accessed. This can help to protect you from identity theft. Sometimes, this is also referred to as a “security freeze”.

Why Would You Consider a Credit Freeze?

Imagine for a moment that someone has stolen your personal details through a data breach and decides to apply for credit in your name. They attempt to initiate an application, posing as you. The creditor then attempts to run your credit, but is unable to pull your report up and see what it says. This means that they will deny the application, and the identity thief will need to search for another way to take advantage of your stolen information.

It should be noted that freezing your credit is not a bulletproof way to stop all identity fraud. But it is one relatively easy way to prevent quite a few possible scams.

Pros of a Credit Freeze:

  • A credit freeze can help prevent certain types of identity theft.
  • As the FTC references on this page, it is now free to get a credit freeze. It is also relatively fast and easy. Note that you need to do this at all three major credit bureaus (Equifax, Experian and TransUnion to be fully protected).
  • Your ability to use the credit you have right now remains unaffected. Consumer expert Clark Howard at Clark.com (@ClarkHoward) explains, “Freezing your credit files has no impact whatsoever on your existing lines of credit, such as credit cards. You can continue to use them as you regularly would even when your credit is frozen”.

Cons of a Credit Freeze:

  • Anytime you want to apply for new credit or a new loan, you need to temporarily “thaw” your credit. This may also be required if someone is going to run your credit when you are applying for a job or shopping for insurance or utilities.
  • If an identity thief compromises your existing credit accounts, you can still lose money.
  • There are other identity theft crimes which a credit freeze does not protect you from (like health insurance fraud).

Is a Credit Freeze Right For You?

Credit and credit card expert LaToya Irby (@latoyairby) at The Balance suggests:

“Consider placing a security freeze on your credit report if any of the following applies to you.

  • You’ve been a victim of identity theft
  • Your credit card number has been stolen
  • Your mail has been tampered with or stolen
  • You want to protect yourself from identity theft
  • You’re subscribed to a credit monitoring service.”

 

Attorney and credit expert Shiva Bhaskar (Shiva Bhaskar) on Quora does state, “I think a credit freeze is unnecessary, unless you know that you’ve actually been a victim of identity theft, not just a data breach. If you were an identity theft victim, you should contact the police, obtain a report, and submit to the credit bureaus, and your reports will be frozen, for free.”

How to Place a Credit Freeze

Ultimately, you will be the one who needs to make a decision about whether to freeze your credit.

The exact instructions for freezing your credit vary from one bureau to the next. In general, with all three major credit bureaus, you may request a freeze online, over the phone or through snail mail. If you are requesting your credit freeze online, in most cases, it will probably only take you a few minutes. The freeze should become active within a single business day if you use the online or phone method.

How to Lift a Credit Freeze

How do you unlock a credit freeze? In the majority of states, you will need to manually request that the freeze be removed. You can request that the freeze be unlocked permanently, or you may ask for a temporary thaw.

If seven years have passed, and you reside in Kentucky, Pennsylvania, Nebraska, or South Dakota, the credit freeze on your file will be lifted automatically. If you require the freeze be reinitiated, you simply need to follow the original procedure to request another freeze.

Conclusion

You now should have a solid understanding of what credit freezes are, how they work, and what their benefits and limitations are. While a credit freeze cannot prevent all forms of identity fraud, it is a valuable tool which under certain circumstances may reduce the likelihood of an identity thief wreaking havoc on your financial life.

Contributors

Clark Howard Photo

Clark Howard (@ClarkHoward) is known for his website Clark.com as well as his national radio show. As a consumer expert, he strives to help people save money while shopping and making financial decisions.

LaToya Irby Photo

LaToya Irby (@latoyairby). With more than a dozen years of financial reporting experience, LaToya Irby’s financial advice and observations have been cited in publications such as The Chicago Tribune, USA Today and US News and World Report.

Shiva Bhaskar Photo

Shiva Bhaskar (Shiva Bhaskar’ Quora Profile) Shiva Bhaskar is a credit expert and attorney, and is also the co founder of Tier One Credit. He was featured as a Top Writer on Quora in 2018.

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