Credit Repair

What is a Credit Freeze and How Is It Done?

Identity theft is at an all-time high in the U.S., claiming 16.7 million people last year, according to Javelin Strategy & Research — that’s an 8% uptick from 2016. The kicker is that the average victim spent around 16 hours — and nearly $300 — erasing the damage.

The massive Equifax data breach of 2017 put identity theft front and center, but one uplifting tidbit is that consumers are reacting. Nine in 10 Americans took some action to prevent identity theft in the wake of the breach, according to a recent survey by CompareCards.com, a LendingTree company. About one-third (30 percent) of consumers have ever frozen or locked their credit, and half of those who said they froze their account also said the freezes or locks are still active today, the survey found.

“People have clearly been spurred to action, and that’s great news,” said Matt Schulz, chief industry analysts for CompareCards. “Whether they’re reacting to the Equifax breach or any of the other myriad data breaches we’ve seen recently, Americans are taking concrete steps to protect themselves and their money.”

But what is a credit freeze, and how exactly does it protect you? We caught up with the experts to pick apart the details.

In this post we’ll cover:

What is a credit freeze?

What are the benefits of freezing your credit?

What are the drawbacks to a credit freeze?

How is a credit freeze different from a credit lock, fraud alert or credit monitoring?

How to freeze and thaw your credit with the major credit bureaus

How to lock and unlock your credit report with the major credit bureaus

Free ways to monitor your credit

What is a credit freeze?

Establishing a credit freeze (also known as a security freeze) is exactly what it sounds like — taking your credit report out of circulation, which temporarily suspends your ability to open any new credit until you choose to thaw it. That means that if an identity thief tries to open any new loans or lines of credit in your name, they’ll be denied since the lender won’t be able to access your credit report to make a lending decision.

“It’s very proactive because if someone wants to apply for something in your name, your credit identity is essentially the brass ring,” credit expert John Ulzheimer, formerly of FICO and Equifax, told LendingTree. He added that credit freezes are also wise for anyone who’s already been victimized and want to protect themselves from being taken advantage of again.

Freezing your credit report requires reaching out to each of the three credit bureaus individually. (We’ll break down exactly how in just a bit.) Think of it as placing your credit report in a lockbox for safekeeping — no small thing, considering that a skilled hacker could very well use your personal information to open new lines of credit in your name. Plus, a credit freeze has no effect on your credit score.

“A security freeze will prevent that,” Anthony Davenport, founder, and CEO of Regal Credit Management and author of Your Score: An Insider’s Secrets to Understanding, Controlling, and Protecting Your Credit Score, told LendingTree. “You lock your home, you lock your car; now with all these data breaches you have to think about locking your credit, as well.”

Credit freezes are available to all, but how much you’ll pay varies from state to state. Davenport says that the norm is anywhere from $5 to $10 per bureau. There is one big bright spot, though: come Sept. 21, a new federal law will make credit freezes and year-long fraud alerts free of charge.

What are the benefits of freezing your credit?

Credit freezes take effect almost in real time. Ulzheimer recently thawed his credit report with all three credit bureaus in a matter of minutes using his smartphone.

“There’s no meaningful delay in the freezing and thawing process,” he said. “They’re not as cumbersome or problematic as you might think.”

Credit freezes also come with one other significant perk — once it’s in place, the credit bureaus can no longer sell your data. “They make the majority of their money by collecting all this data on what you buy, how you pay back loans, the amounts and so on, then selling that,” said Davenport.

Ever apply for a mortgage with one lender, only to get flooded with competing offers soon after? The credit bureaus sell lists of consumers directly to lenders, insurance companies and other creditors — and it’s completely legal, so long as these credit offers meet certain requirements. According to the Federal Trade Commission, these offers stem from information on your credit report that tells lenders you might meet their lending requirements. (Those who don’t want to receive these offers can also opt out at any time here.)

What are the drawbacks to a credit freeze?

When you initially take steps to freeze your credit, you’ll receive a PIN from each credit bureau that you’ll need to keep handy for when it comes time to thaw your report. If you misplace it, the process becomes more drawn out. Retrieving your PIN often requires writing to the bureaus and providing proof of identity so that they don’t accidentally let an unauthorized person get their hands on your personal information.

“It’s almost like people complaining about the color of the ink on their lottery check,” said Ulzheimer. “It’s a pain if you lose your PIN, but if anything, you should be happy because it proves that the freeze is working.”

One other note worth mentioning: Davenport suggests double checking your name, address and social security number on each credit report before initiating a security freeze. If there’s an error on there that you’ve overlooked, it could create unnecessary complications when you go to unfreeze it and run into discrepancies.

How is a credit freeze different from a credit lock, fraud alert or credit monitoring?

These terms may sound interchangeable, but they’re actually very different things. Now that you’ve got a handle on credit freezes, let’s break down these other products.

Credit locks: These sound a lot like credit freezes, but there are some key differences. After signing up with each credit bureau, they allow you to essentially lock and unlock your credit report with the click of a button — no PIN needed. But, according to Davenport, they’re not quite as secure as freezes.

“In order to lock and unlock, all you need to know is someone’s personal identification information, like their name, address, social security number and date of birth,” he said. “A thief would already have that, so they’re not secure.”

In addition, unlike credit freezes, credit locks still allow the bureaus to sell your data to third parties, and you’ll also want to check the fees before enrolling. (We’ve broken them down by credit bureau below.) For these reasons, credit freezes stand out as a more secure, cost-effective alternative.

“Make sure you don’t buy something when you have a completely free alternative just dangling out there waiting for you to take it,” added Ulzheimer.

Fraud alerts: This is meant to be a free, proactive way to prevent identity theft. At your request, you can put a note on your credit report that says that businesses need to verify your identity before any new credit is issued.

“A lot of people do a fraud alert thinking they’ve done what they need to do, but the problem is, how often do you apply for credit in front of a human being who then reads your credit report and then sees this note?” asked Davenport. “Everything’s automated these days.”

In other words, he worries that things could slip through the cracks. Unlike credit freezes, lenders can still pull your credit and make a lending decision while the alert is in place. One upside, however, is that you only need to contact one bureau to set up a fraud alert. From there, they’ll contact the other two agencies. The alert itself is good for 90 days, at which point you can manually renew it if you so choose. What’s more, victims of identity theft can opt for an extended fraud alert that lasts seven years. Deployed service members can also add an active duty alert to their credit reports. This type of fraud alert is good for one year, at which point you can reapply if you’re still deployed.

Credit monitoring: This is precisely what the name implies. Enrolling in a credit monitoring service means that you’ll get an alert if any new activity appears on your credit report. Put it another way: the alert comes after you’ve already been hacked, at which point you’ll have to deal with any potential repercussions — it doesn’t actually prevent theft.

Prices and services vary widely here. Some providers may only monitor one credit bureau’s credit report, leaving the other two vulnerable to attack. Others may charge individual fees every time you view one of your reports. Davenport says there are plenty of other ways to monitor your credit for free, which we’ll dive into in just a moment.

Monitor your credit for free > My LendingTree is an online tool where you can not only get your credit score but track your report online for free.

How to freeze and thaw your credit with the major credit bureaus

Experian TransUnion Equifax
Online Click here Click here Click here
Mail Experian Security Freeze

P.O. Box 9554

Allen, TX 75013

TransUnion Security Freeze

P.O. Box 2000

Chester, PA 19016

Equifax Security Freeze

P.O. Box 105788

Atlanta, GA 30348

Phone 1-888-EXPERIAN

(397-3742)

1-888-909-8872 1-800-685-1111

(New York Residents: 1-800-349-9960)

How to lock and unlock your credit report with the major credit bureaus

Experian TransUnion Equifax
Online Click here Click here Click here
Cost $4.99 for the first month; $24.99 for each additional month. Free Free

Free ways to monitor your credit


Monitoring your credit doesn’t have to be a complicated (or costly) affair. My LendingTree.com provides free, personalized tips to help improve your financial health and boost your credit score. Davenport also recommends taking advantage of AnnualCreditReport.com, which grants you access to one free credit report per year from each bureau. Your best bet is to space them out so that you’re ordering one every four months. Just keep in mind that your credit report doesn’t show your actual credit score. Don’t fret; LendingTree has you covered with this free tool. Some good news: none of these services will affect your credit.

Some parting thoughts

A credit freeze, which you can arrange with each of the three credit bureaus, takes your credit report out of circulation so that no new credit can be issued in your name. Only you can freeze and unfreeze your report, and your credit score won’t be affected. The fee varies from state to state, but it’s generally pretty nominal — and as of Sept. 21, it’ll be free nationwide.

Credit freezes are different from credit locks, fraud alerts, and credit monitoring services. The most important takeaway? Our expert insiders say that freezing your credit is your best (and most budget-friendly) protection against identity theft.

 

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