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Best Practices

Freezing Your Credit: How It Works

In today’s digital world, news of database breaches and widespread hacks seem all too frequent. If a bad actor manages to get ahold of your personal information, they can seriously damage your credit profile by taking out loans in your name or racking up unpaid debts. Many people consider it a good idea to freezing your credit to help protect your financial well-being from the negative effects of identity theft. Let’s take a closer look at what it means to freeze your credit and if it may be a good idea for your particular situation. We’ll also cover the steps you would need to take to freeze your credit.

Freezing your credit: What does it mean?

A credit freeze restricts access to your credit report. Since most lenders require a credit check before approving a new account, a credit freeze makes it more difficult for identity thieves to open a new account in your name. Once you request a freeze, the credit reporting bureau must apply it within one business day if the request was made by phone or online, or within three business days after receiving your request by mail.

A credit freeze won’t prevent everyone from seeing your credit report. For example, creditors of accounts you currently hold and certain government agencies can still see your file while a freeze is in place. Because of this, it’s important to continually monitor your existing accounts and transactions even if your credit is frozen. In addition, a freeze won’t apply to someone requesting your report for employment, tenant-screening or insurance purposes.

The freeze will remain active until you ask the credit bureau to temporarily lift the freeze or remove it completely. For either action, you’ll likely have to use the personal PIN or password you set up when you activated the freeze. If you submit your request to lift the freeze online or by phone, the bureau must lift it within one hour. If your request is sent by mail, the bureau must lift the freeze within three business days of receiving your request.

Should you freeze your credit?

Under certain circumstances, consumer advocates say it’s advisable to place a freeze on your credit reports, including if you’re a victim of identity theft, if your information was part of a data breach, or if your credit card, wallet, account information and/or mail has been stolen.

Many people also choose to freeze their credit proactively before any signs of potential identity theft happen. A credit freeze won’t prevent you from getting a new loan, but to open a new account, you will need to take the necessary steps to lift the freeze temporarily, either for a specific timeframe or for a particular institution. If you’re planning to finance the purchase of a new car, for example, you’ll have to plan ahead to make sure the lender is able to access your credit report at the time of your application.

Freezing your credit won’t impact your credit score and won’t keep you from accessing your free annual credit report.

If you’re worried about the possibility of identity theft but don’t want to freeze your credit, you could consider a fraud alert instead. When you set up a fraud alert, creditors may still get a copy of your credit report, but only if they take steps to verify your identity by contacting you. With a fraud alert, you only need to contact one of the three major credit reporting bureaus: The credit bureau you contact must tell the other two about your alert. It’s free to place a fraud alert on your report. A fraud alert can last either one year (an initial alert) or seven years (an extended alert, for verified victims of fraud or identity theft).

How to freeze your credit

Under a 2018 federal law, there is no cost to freeze and unfreeze your credit at the three major credit reporting bureaus. However, you’ll have to contact each bureau separately to set up a freeze. Here’s how to get started:

You’ll need to provide your name, address, date of birth, Social Security number, proof of identification and other personal details. And make sure to choose a secure password and pin that you won’t forget, because you’ll need these to unfreeze your credit.

Freezing your credit offers you a proactive way to protect your identity. If you’re worried about the possibility of identity theft, 2019 might be the year you consider freezing your credit.

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