One option many people may be unaware of is the possibility of freezing your credit in cases of identity theft or fraud. A credit freeze, also called a security freeze, prevents any inquiries into your credit without your express consent. Your existing lines of credit remain, and you can use a PIN number to lift the freeze should you wish to open a new line of credit. When creditors access your credit report, new lines of credit in your name cannot be opened. Some 46 states and the District of Columbia have laws in place to allow consumers to freeze their credit either to deal with or prevent identity theft and the three major credit bureaus extend security freeze options to residents of other states.
Why should you consider a credit freeze? The most common reason to use a security freeze on your credit is to prevent further credit problems due to identity theft. Identity theft is a common problem, and can be devastating for your credit rating. Setting up a credit freeze if you feel your personal information has been compromised can help to prevent the damage done by identity theft. While nearly every American consumer is eligible to set a security freeze, there may be fees for some; however, those fees are waived if you have been a victim of identity theft or fraud. You may also want to consider a security freeze if you have reason to believe that the confidentiality of your social security number has been compromised or if you believe that your personal information has otherwise been stolen.
If you have not been a victim of identity theft, you may still want to consider a credit freeze. If you do not expect to be opening lines of credit with any regularity, a credit freeze can be much less costly than a credit monitoring service. Fees vary for placing a security freeze; however, you should keep in mind that you will need to contact each of the three credit reporting agencies in order to place a freeze on your credit report.
You can find instructions and more information on placing a credit freeze at consumersunion.org, as well as information on state laws regarding this useful consumer tool. A credit freeze lasts until you choose to lift it and has no impact on your credit score.
A credit freeze is a poor choice for some consumers. If you like to use instant credit, a credit freeze is not a practical choice. Current law allows the credit reporting bureaus three business days to lift a security freeze. You should also carefully consider a credit freeze if you expect to apply for credit in the near future. While a security freeze can prevent damage to your credit if your identity is stolen, it will not protect accounts that already exist in your name. You are responsible for keeping those account numbers confidential and reporting them stolen if appropriate.