What is a Credit Freeze?

What is a Credit Freeze
Elliott Appel, CFP®, CLU®, RLP®

Elliott Appel, CFP®, CLU®, RLP®

Welcome! I'm Elliott, the founder of Kindness Financial Planning, LLC, a fee-only, fiduciary advisor located in Madison, WI working virtually with widows and caregivers across the United States. When I'm not helping people live their ideal life, I'm often cooking for my wife, playing tennis, or hiking.

Did you know that your information, such as your Social Security number, date of birth, and other pieces of information needed to open credit in your name, may be available on the dark web, available for purchase? 

With data breaches becoming common and the Equifax data breach in 2017 where 147 million people had their personal information exposed, there is a good likelihood your information is available online for someone to use to commit fraud. 

Since your credit history and score can affect your ability to get a mortgage, rent an apartment, get a credit card, and more, it’s important to protect your credit.

A credit freeze is one way to help protect your credit. 

Let’s explore what a credit freeze is, how it protects you, and other important information about credit freezes. 

What is a Credit Freeze?

A credit freeze allows you to restrict access to your credit report. 

There are three main credit bureaus that report your credit history, which lenders use to help decide whether to extend debt. By freezing it at each credit bureau, you can help prevent people from opening a new credit account in your name. 

For example, if a thief was attempting to open a credit card account in your name and your credit was frozen, when the credit card company attempts to look at your credit history, they will see they don’t have access, which should stop the account from being opened.

If you didn’t have the credit freeze in place, the credit card company may open the new account and allow the thief to spend money in your name. 

Once you freeze your credit, it remains in place until you remove or temporarily lift it. A credit freeze does not affect your credit score and you can unfreeze or lift the credit freeze when you need to apply for credit. 

How does a Credit Freeze Protect Me? 

A credit freeze is free and reduces the likelihood that a scammer can open fraudulent accounts in your name. 

With personal information online from data breaches, it may be easy for someone to use that information to open a loan in your name. If you are the victim of fraud, it can be time consuming to fix it. 

By freezing your credit, you block access for the lender to see your credit report, which they often need to see to approve an application. It’s a layer of protection to help prevent fraud. 

How Do I Freeze My Credit? 

Freezing your credit is easy at each of the three main credit bureaus. 

Although you can freeze your credit by phone or mail, the easiest way to freeze and manage it going forward is to create an online account at each credit bureau. The initial process may take about 15 minutes, but once it is set up, it is easy to lift and freeze again in the future. 

You’ll need your Social security number, date of birth, address, and other personal information to freeze your credit. 

If you have trouble freezing it online, you may need to freeze it by mail. 

How Long Does it Take To Freeze My Credit? 

Once you have an account with each credit bureau, it’s very easy to freeze your credit. It normally can be done in under five minutes.

Once you submit the request online, it’s almost instantaneous, but it could take up to one hour. 

How do I Unfreeze my Credit? 

If you create an account with each of the three main credit bureaus, unfreezing your credit is easy.

You need to login to the account, request a temporary lift if you only want to lift it for a limited amount of time, and follow the prompts. It can normally be done in under five minutes. 

Once the request is submitted, it’s almost instantaneous, but it could take up to one hour. 

If you want to unfreeze your credit permanently, you can do that online, too. Many people normally do a temporary lift if they are applying for new credit.

For example, if you are applying for a new credit card, you can ask which of the three credit bureaus they use to run your report because many only use one. From there, you can temporarily unfreeze that one credit bureau for a day or two while they run the report. By temporarily unfreezing your credit, you provide access to the lender that needs it and then the freeze is automatically placed back on the account. This is a great method for unfreezing because you only need to take one step. 

If you permanently unfreeze it, you would need to manually go back to freeze it again. 

You can also unfreeze your credit by phone or mail, but again, it’s more time consuming, has a delay, and it’s not as easy. 

What’s the Difference Between a Credit Freeze and Credit Lock?

While credit freezes and credit locks can both help prevent fraud, credit freezes are free while credit locks usually cost money, often through a subscription service that could cost $24.99 or $29.99 per month

It can be confusing because TransUnion, Equifax, and Experian offer credit freezes and credit locks. 

The credit locks often provide similar coverage in that they restrict access to your credit report, but they also sometimes provide identity theft insurance and alerts. 

For many people, a credit freeze is going to be sufficient. It limits access to your credit report, which is the key to helping prevent fraudulent accounts from being opened.

What is a Fraud Alert?

A fraud alert is a free alert you can place on your credit file with each of the three main credit bureaus.

The fraud alert tells lenders and credit card companies that you may have been a victim of fraud and encourages them to take extra steps to verify your identity before issuing credit. 

Fraud alerts can last different lengths. A temporary fraud alert lasts one year, and you can renew it as many times as you want. An extended fraud alert lasts seven years, and is only available to people who have been victims of fraud or identity theft. You need to submit a copy of the identity theft report filed with law enforcement to obtain an extended fraud alert. 

A fraud alert and credit freeze can be used in tandem. A fraud alert can be helpful in addition to a credit freeze because a fraud alert may cause a lender to call you to verify your application, which can help identify the potential fraud. 

How to Access Your Credit Report

Although freezing your credit is a good step to help prevent fraudulent accounts, you should still review your credit report regularly. Even if you have a freeze on your credit, you can still check your credit report without lifting the freeze. 

You can request your credit reports from https://www.annualcreditreport.com/ every 12 months from each credit reporting company. 

Instead of checking the three credit bureaus at once, some people stagger them throughout the year. For example, they may check TransUnion in January, Equifax in May, and Experian in September. This is a strategy to get eyes on your credit report multiple times per year to make sure open accounts are legitimate.

Pros and Cons of a Credit Freeze

Although there are a few cons to a credit freeze, I am firmly in the camp that the pros of a credit freeze outweigh the cons. 

Pros of a Credit Freeze

There are many pros to a credit freeze. 

Easy to Freeze Your Credit

Once you create an account, it’s easy to freeze your credit. You can do it with a few clicks. Unless you can’t verify your account online, it’s easy to freeze it in about 15 minutes.  

Reduces Likelihood of Fraudulent Accounts

Since your credit is frozen and a lender won’t have access to view your credit, they should not open the credit account. 

When I’ve tried opening a new credit account and had my credit frozen, they call me to let me know it’s frozen, and ask me to unfreeze it. 

Given the number of fraudsters, a credit freeze acts as a first line of defense against someone opening credit in your name. 

Credit Freeze is Free

Unlike the past, where you may have had to pay to freeze your credit, it’s free to freeze your credit now. You can freeze and unfreeze it as often as you like.  Prior to 2018, the rules varied by state, but it could cost around $30 to freeze your credit at all three credit bureaus. 

Cons of a Credit Freeze

There are a few cons of a credit freeze, but personally, the pros easily outweigh the cons for most people. 

Takes Time

Although it’s easy to freeze your credit, it does take time. You may need to spend 45 minutes, possibly longer, setting up the accounts at the three credit bureaus. If you are unable to do it online, you may need to call them or mail paperwork, which can be time consuming. 

It’s still worth it given the number of hours people need to spend when a fraudulent account is opened in their name. I’d much rather spend the time upfront helping to prevent identity theft than try to correct it after the fact. 

Requires Three New Accounts

Since you may want to freeze your credit online, it does require three new logins. In a world where many people already have 50+ logins, it’s tough to stomach three more. Perhaps it’s a good reason to use a password manager

Need to Lift Credit When Applying in the Future

Most people are not applying for new credit multiple times a year, but for those who do, it could be a pain lifting the credit each time you need to apply. It requires you to login at each credit bureau and go through the steps to temporarily lift it long enough for the lender to pull your credit history. 

The last time I temporarily unfreezed my credit, it took 2-3 minutes to do it. Many people should be able to do it in under 5 minutes. If you need to lift it at each bureau, it may take 15 minutes. 

That’s a small time commitment compared to what could happen if you need to deal with a fraudulent account. 

For those who rarely apply for new credit, you may go a few years without needing to unfreeze your credit. 

Doesn’t Prevent Fraud on Existing Accounts

One downside to a credit freeze is that it doesn’t protect you on your existing accounts. If someone fraudulently spends on your credit card, a credit freeze isn’t going to protect you from it. 

It only protects you from new accounts fraudulently being opened in your name.

That’s a good reason to check your accounts regularly for fraud and report is as soon as you notice it.  

Final Thoughts – My Question for You

A credit freeze is a powerful action you can take to help prevent fraudulent accounts from being opened in your name. 

When you enable a credit freeze, lenders will be unable to access your credit report and should stop them from issuing credit in your name. 

If you need to apply for credit, it’s easy to temporarily lift your credit freeze for your lender to access your credit report. 

A fraud alert can also be used in coordination with a credit freeze to provide more protection. 

Although there are cons to a credit freeze, the pros normally outweigh them. 

I’ll leave you with one question to act on. 

If your credit isn’t frozen, do you plan to freeze it and, if so, by when? 

Disclaimer: This article is for general information and educational purposes only and should not be considered investment, financial, legal, or tax advice. It is not a recommendation for purchase or sale of any security or investment advisory services. Please consult your own legal, financial, and other professionals to determine what may be appropriate for you. Opinions expressed are as of the date of publication, and such opinions are subject to change. Click for full disclaimer.

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