It's an awful feeling: that dread rising from the pit of your stomach and panic mounting when you notice that someone has tapped into your credit. The damage of identity theft can be severe, particularly if left unchecked. But you can take steps to protect yourself.
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A credit freeze can be a first line of defense. Freezing your credit may protect you against further attacks while giving you the breathing room you need to clear up problems. Thanks to a new federal law, freezing your credit is free.
Here's how it works, so you can decide if a credit freeze is right for you.
What is a credit freeze?
"A credit freeze is something that limits your access to your credit file," says Paige Hanson, chief of identity education at Norton LifeLock, which offers identity threat protection. "This makes it difficult for people to open new accounts in your name, and the freeze will remain in place until you lift it."
By freezing your credit report, you prevent most businesses and lenders from gaining access to your credit history. But a credit freeze also achieves another aim.
Rod Griffin, director of public education for Experian, one of the three major credit bureaus, says, "The idea behind a freeze is that you are blocking access to your report from a potential identity thief."
A credit freeze may seem like an extreme move, but it can be a powerful way to protect against identity theft.
How do you freeze your credit?
If you request the freeze online or by phone, the bureau must place the freeze within one business day. If you make your request by mail, the credit bureau – also known as a credit reporting agency – must place the freeze within three business days.
Remember, you must contact all three bureaus to freeze your credit. Placing a freeze with one bureau won't affect your credit report at the other two.
As part of the process, the credit bureau will ask you to provide identifying personal information. This includes your name, address, date of birth and Social Security number.
Once you've requested a credit freeze, the credit bureau will give you a personal identification number. Hold on to this PIN. You'll need it to lift the freeze from your credit file.
A credit freeze stays in place until you ask the credit bureau to remove it.
The good news is that a thaw can happen within one hour if you request it by phone or online. If you mail your request, the credit bureau must lift the freeze within three business days of receipt.
You can choose to unfreeze one or all of your credit reports. You will need to contact each bureau to remove the freeze, as you did when you placed the freeze.
Alternately, you may want to briefly lift a freeze because you are applying for a credit card or a job. You can try to find out which credit bureau the issuer or employer will use and save some time by lifting the freeze only with that bureau.
What is the cost of a credit freeze?
Whether you paid to freeze or unfreeze your credit used to depend on your state. The Economic Growth, Regulatory Relief and Consumer Protection Act of 2018 changed that. Now consumers in all 50 states can freeze or unfreeze their credit for free.
The law also allows parents to freeze the credit files of their children ages 16 and under for free. Guardians, conservators and individuals with power of attorney can freeze their dependents' credit files for free as well.
In addition, the law extends free fraud alerts placed on your credit reports from 90 days to one year. When lenders pull your report, they will be notified that you may be the victim of identity theft and should contact you before opening an account in your name.
Who should consider a credit freeze?
If your personal information has been compromised, a credit freeze may be appealing. Armed with your name, address, Social Security number and other private details, a fraudster can open accounts in your name without your knowledge.
Unfortunately, your personal information can be stolen in many ways. You might be one of the millions of Americans exposed after a corporate data breach. You may have fallen victim to a phishing scam. Or your data could have been stolen right out of your home's trash can.
A credit freeze may be a good idea if your daily life doesn't require occasional access to a credit report. For instance, a freeze can make sense for an elderly relative who has minimal financial dealings and is at risk for fraud, Griffin notes.
It could also make sense if you're a victim of identity fraud, and less drastic attempts at protecting your credit haven't worked well.
A credit freeze comes with many advantages:
- It adds a layer of protection to accounts in your name.
- It does not negatively affect your credit score.
- It lets you use your accounts, open accounts, take out loans and more. But you may need to lift the freeze temporarily.
- It allows creditors you already do business with to access your credit report. If you wanted to request a credit limit increase, you wouldn't need to worry about lifting the credit freeze, for instance.
What are the disadvantages of a credit freeze?
When people use credit freezes, one major problem can be the risk of developing a false sense of security, Griffin says. "Just because you have a freeze, it doesn't mean you're safe from identity theft," he says.
Remember: A freeze's only function is to restrict access to your credit report. A savvy criminal can still find ways to run up a tab on your credit lines or file taxes in your name. Also, lifting and reinstating credit freezes can be inconvenient, particularly if you have an active financial life.
Whenever you want to give someone access to your credit report, you need to rescind the credit freeze. Your day-to-day life may be more affected than you might think, Griffin says. You may need to thaw your credit report if you're applying for a job, getting an apartment, signing up for cellular service, changing utility providers and more.
Contending with your frozen credit can cause some inconvenient delays. Technically, a freeze must be lifted within one hour of requesting it by phone or online, but Experian recommends allowing at least three days.
Ultimately, freezing and unfreezing your credit could cost you time and aggravation, especially if you have to do it several times.
Is a credit freeze your only option?
Be sure to weigh your options before requesting a freeze.
If you detect misuse of a credit card, your best bet is to file a police report and work with your card's fraud department. Request a replacement card with a new number, and set up automated purchase alerts. Then, keep a close eye on your account to spot unauthorized charges.
Every situation is unique. "A credit freeze is just for credit-related issues," Hanson says. "There are a number of identity theft-type cases that aren't revolved (around) your credit."
Instead of a credit freeze, you might want to choose:
An initial fraud alert. "The purpose of a fraud alert is to verify your identity before extending you new credit," Hanson says. An initial fraud alert, or security alert, lasts one year and requires creditors to confirm that it's really you – typically via a phone call – before they'll open a line of credit in your name.
Placing a fraud alert is free and easy to do. You only have to contact one credit bureau, which will notify the other two on your behalf.
An extended fraud alert. The Fair and Accurate Credit Transactions Act, or FACTA, allows victims of identity theft to request an extended fraud alert. That means new creditors must confirm your identity for seven years. To qualify, submit an identity theft report with the Federal Trade Commission.
Credit monitoring services. Many companies that succumb to data breaches offer the victims access to free credit monitoring for a period of time.
Of course, if you want some peace of mind, you can sign up for credit monitoring on your own dime. LifeLock and Experian's CreditWorks both offer daily babysitting of your credit report for a fee.
But even if you skip the paid monitoring, you are legally entitled to a free copy of your credit report once a year from each credit bureau.
A credit lock. A credit lock and a credit freeze are alike because both block creditors and others from accessing your credit file and opening accounts in your name. The difference is that a lock is faster and easier to undo than a freeze. You can unlock your credit file instantly online using a mobile app versus needing a PIN with a credit freeze.
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