Credit freeze or unfreeze made easy
Unfortunately, identity theft has become an all-too-common issue for plenty of consumers. Human error or an ill-timed security slip-up could open a chance for fraudsters to leave your finances in dire straits.
Luckily, in addition to the many other preventative actions available, you do have the option to cease your lending activity with a credit freeze.
How does a credit freeze work?
Unchecked identity theft can quickly tarnish financial prospects you may have spent years planning. Buying a home, opening a line of credit or applying for an apartment become immensely more difficult following fraudulent activity.
A credit freeze works to stop these criminals in their tracks by preventing anyone from accessing your credit report.
When an identity thief attempts to open a line of credit or take out a loan in your name, one of the first steps the lender takes is requesting your credit report. Creditors will always review an applicant's credit report to see if they qualify for financing.
A credit report gives lenders an overview of your current financial situation and history of debt management. Any closed loans, payment patterns and the status of current debts are all highlighted on credit reports, factoring heavily on your lender’s decision whether to approve a loan.
Someone with a squeaky clean credit report who boasts a high credit score would be an ideal target for fraudsters looking to make an easy buck. When applying for credit under someone else’s name, identity thieves rely on the lender’s ability to pull these reports without issue and conduct the loan approval process normally.
By issuing a credit freeze with the three major credit bureaus, you’d essentially be placing a lock on your report, letting financial institutions know you don’t want anyone accessing your credit file.
Without access to this information, the lender can’t approve financing, leaving your identity thief without a means of opening new accounts.
How do you file a credit freeze?
In order to freeze your credit, you’ll need to file a request with the three major credit bureaus, Equifax, Experian and TransUnion. This usually involves providing your SSN, proof of residence and a copy of your photo ID.
Each bureau might include their own specific requirements, such as setting up an account and receiving a personal identification number to manage the credit freeze. Additionally, there are lesser-known credit bureaus that some scammers may resort to if you issue a freeze. For the sake of due diligence, it might be a good idea to notify these institutions-Innovis and the National Consumer Telecom & Utilities Exchange-about your wish to issue a credit freeze.
Once the freeze is established, no one will be able to access your credit file, even you. If you do wind up needing a loan in the midst of a credit freeze, you’ll need to make sure the lock is lifted before you apply. A credit freeze can be lifted temporarily or permanently at your discretion.
Is freezing your credit a good idea?
A few years ago, freezing your credit used to require a fee. However, as of September 21, 2018, the Economic Growth, Regulatory Relief and Consumer Protection Act put an end to that. Today, issuing a credit freeze is free. There is also no impact on your credit score, giving many folks a good reason to take advantage of the extra security this step provides.
Often, people won’t wait for fraudulent activity to appear on their credit reports before requesting a freeze. Since the tactic comes with no cost, it might be a good idea to freeze your reports as a precautionary measure and stave off identity thieves from the outset.
You’ll need to occasionally lift the freeze whenever you take out a new loan or line of credit, which could be inconvenient and slow down the lending process. However, it’s a small price to pay compared to the complications that come from identity theft.
Of course, there are other ways for criminals to get around these protections. Your existing accounts could be compromised without the need to access a credit report, while tax refund scams can be conducted with minimal personal information. While freezing your credit might be a good idea, it should just be a part of a larger, more robust theft prevention strategy.
How do you unfreeze credit?
After you initiate the freeze with the various credit bureaus, you’ll likely be given a PIN or password that allows you to unfreeze your account online.
You can also contact the bureaus via phone. They’ll likely still ask for your registered PIN in this scenario, so be sure to have that on hand. Canceling a freeze can also be done via postal mail, but it will take a bit longer for the process to unfold.
If you’re making these changes online, unfreezing your credit takes effect very quickly, usually within a few minutes of issuing the request.
If you need to apply for a loan but are still worried about identity theft, you can always ask your lender which bureau they will use to pull your report. Then, you can unfreeze your credit with that bureau alone rather than a sweeping unfreeze across all institutions.
Once the loan is finalized and your lender has no more need for your accounts, you’ll be able to put the credit freeze back in place.
Credit freeze vs. fraud alert
If you’ve already had the unfortunate experience of falling victim to identity theft, you could also issue a fraud alert.
A fraud alert won’t lock up your credit reports the same way as a freeze. Instead, fraud alerts protect your personal information from someone gaining unauthorized access to an account by informing those same major credit bureaus that your identity was possibly stolen.
Any lender that encounters this alert is further required to verify the person applying for credit is actually you. Typically, fraud alerts have a duration for one year, but can be extended to a seven-year protection plan.
Freezing your credit, while a necessary step after fraud has been detected, is commonly used preemptively in order to stop fraudsters before they can even access your information.
While it might make some situations add a bit of a delay to the mortgage process, the benefits of a credit freeze far outweigh the minor inconveniences they can cause.
Disclaimer: Guaranteed Rate does not provide credit repair or credit counselling services.