What Is a Credit Freeze?

What Is a Credit Freeze?

July 28, 2020         Written By Heaven Speirs

What Is a Credit Freeze?

A credit freeze is a hold put on a person’s credit that prevents banks from pulling their credit reports. This is viewed as the ultimate form of credit protection, and it ensures that no one will see your credit for fraudulent purposes. Nevertheless, it is not always a good financial strategy.

What is a credit freeze? How does it work? Should you use one? Find out the answers to those questions and more in the information below.

The Definition of Credit Freeze

A credit freeze places a hold on your credit files. This process is also known as a security freeze, and it is available with all three credit bureaus. If you or someone else tries to put in an application for a loan, credit card, or another line of credit, it will be declined because the lender or creditor cannot access your report for evaluation. This prevents someone from applying for a line of credit without your consent. 

Benefits of Freezing Your Credit

The biggest perk to freezing your credit is protection during identity theft. If your personal information is compromised, the freeze ensures that no one has unauthorized access to your credit report. If someone tries to apply for a credit card in your name, it will be declined. New loan? Declined. Rental agreement? Declined. Your credit report becomes bulletproof. 

Another benefit to a credit freeze is knowing your information is fully protected. Let’s say you suspect identity theft but are unsure if your information has been compromised. A freeze would safeguard your information during the investigation so you do not have to worry about your finances. 

If you are a caregiver for an elderly or disabled adult, you could enact a credit freeze to protect your loved one’s identity. This is the primary purpose for credit freezes and is popular among adults who no longer need lines of credit. 

Downsides to Credit Freezes

Despite the perks of credit freezes, this is not the best option for most circumstances. Enacting a credit freeze will prevent you from applying for a loan or credit card. If you need quick access to emergency funding, you won’t be able to get it for several days. If you’re applying for a mortgage or auto loan, you will have to lift the freeze and get through the waiting period before submitting the application. That could mean losing your dream home or the perfect vehicle for your family. Moreover, the credit freeze could prevent you from getting utilities, cell phone service, insurance, internet, and any other service that requires a credit check during application. 

Also, keep in mind the amount of time it takes to enact and remove a credit freeze. You have to contact all three credit bureaus individually, and you must provide extensive proof of identity before the freeze is lifted. This is quite a hassle if you’re not in immediate need. Most circumstances do not merit a full credit freeze. 

Credit Freeze Exemptions – What’s Not Covered

Typically, a credit freeze will not prevent an existing creditor from accessing your credit report. For instance, if your current credit card provider wants to send you an offer for a new card, they can still conduct a soft inquiry to issue the offer. If you have an account in collections, the lender can still access certain information to collect the debt.

How to Freeze Your Credit

If you want to get a credit freeze on your account, you will need to contact each credit bureau directly:

 

 

Once you contact each credit bureau, you will be asked to provide sufficient identity verification. The bureau will process the information and place a freeze on your credit report. You will receive a PIN or password to use if you decide to remove the credit freeze. The entire process takes a few days to complete.

In May 2018, Congress made it free to freeze your credit. Previously, there was a $20 fee for each credit bureau. The Equifax data breach of 2017 exposed the personal information of over 147 million Americans. This unprecedented security incident significantly heightened the risk of identity theft in the U.S. That is why Congress decided to take action, waiving the longstanding credit freeze fees. Now the only fees associated with credit freezes are small state-based charges for removing credit freezes. 

How to Remove a Credit Freeze

You can ask for a temporary lift of your credit freeze, or you can have it permanently removed. The temporary lift will give you a chance to submit a few applications without exposing your account. It can take three or more business days to temporarily lift a freeze, so you need to factor that into your timing. Make sure your applications come in after the freeze is removed. 

Completely eliminating a credit freeze takes a little more time, but it is possible. Just like you did to initiate the freeze, you will need to contact all three credit bureaus to have the freeze lifted. Use the PIN or password you created to verify your identity and disable the freeze. You may have to pay a small fee for each removal, depending on where you live. Many states have waived those fees, but some charge between $2 and $10 to complete this process. Wait a few days after the lift before applying for a new loan or credit card.

If you decide that you want to enact another credit freeze in the future, you may do so by following the steps above. 

Will a Credit Freeze Affect My Credit Score?

No, freezing your credit will not hurt or help your credit score. It will prevent someone from fraudulently opening a line of credit in your name, which could protect you from a credit score decrease in the future. The actual freeze will not impact it in one way or another. 

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Who Should Use a Credit Freeze?

Anyone can enact a credit freeze at any time, but it is not ideal for most people. This setup is mostly designed for elderly individuals who no longer need to apply for car loans, mortgage loans, and other major purchases that would require some level of credit. If you plan to apply for any line of credit soon, a credit freeze is probably not a good solution. It will only complicate your applications and create a stressful environment for you.

If you have been the victim of identity theft, a credit freeze might protect your account until an investigation is complete. Once you know that the thieves have been caught and stopped, you may consider removing the freeze or waiting until you require a new line of credit.

Credit Freeze Alternatives

Perhaps a credit freeze is to complicated for what you need. There are other ways to protect your credit from fraudulent use. Here are a few preventative measures you can take to ensure your credit reports are safe:

  • Sign up for an identity theft protection program. There are many of these available online, and they monitor your credit reports for you. Any time something happens to your credit, you will receive an alert via email or text message. You can check your report and see if something is not right.
  • Be careful with your personal information. Make sure you can trust everyone you give your social security number to, especially if you are applying for a loan. Verify the security of any websites you go to, and only apply with those you trust.
  • Watch your credit card accounts closely. If you see any unauthorized charges on your accounts, immediately report them to your issuer so they can be removed.
  • Look over your credit report at least once a year. You can do this for free, and all you have to do is sift through the information. If you see something strange, contact the company associated with it and ask about the situation. If it turns out to be an application falsely filed in your name, you can take legal steps to have the matter resolved.
  • Be aware of data breaches you may be affected by. If you are notified that your personal information was compromised in a breach, change your passwords/PINs, replace affected cards, and watch for fraudulent charges. Learn more: How to Protect Your Personal Information after a Data Breach
  • Change your passwords regularly and avoid duplicate passwords. Do not use the same login information for your mobile banking, email accounts, and social media accounts. This makes you more vulnerable if your login details are stolen in a breach.
  • Check your credit score for unexpected changes. If you see an unexplained drop or decline in your credit score, do some investigating to find out the source. Catching an issue quickly will reduce your credit damage and recovery time. 

Now that you know what a credit freeze is, think about whether or not it is right for you. If it is, you can contact the credit bureaus and start your freeze. Otherwise, follow these tips to protect your credit as much as possible.

The information contained within this article was accurate as of July 28, 2020. For up-to-date information on any of the terms, cards or offers mentioned above, visit the issuer's website. Many of the offers on this article are from our affiliate partners, and LowCards.com may be compensated if you take action with any of our affiliate partners.

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heaven

About Heaven Speirs

Heaven Speirs is a contributing writer for LowCards.com. She remains up-to-date with the latest developments in the credit card industry and the financial sector as a whole. Heaven has over 10 years of experience in online journalism, the bulk of which has been focused on personal finance. Heaven attended Oklahoma State University, where she discovered her talent for research and content creation. In her spare time, Heaven enjoys painting, playing poker, and spending time with her husband and three dogs.