How and Why You Can Freeze Your Credit

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Identity theft is an ever-growing criminal industry. Identity thieves can use your identification information to apply for credit cards, open new lines of credit, and run up huge bills.

While some safeguards exist to keep identity theft victims from being on the hook for these balances, identity theft can nonetheless dampen your credit. Cleaning up your credit report after an identity thief has tarnished it can take months or years.

For this reason, some individuals consider putting freezes on the credit reports available at the three credit reporting agencies. A freeze means that the data in your credit report is not available to anyone, unless you make it available to them.

The bad news is that freezes can cost money. Some states have mandated that freezes be free, and others have set maximum fees for freezes. For most people, establishing a freeze will cost $10 at each of the credit reporting agencies. Which means that a freeze could cost you $30 because freezing just one of your reports is minimal protection against identity theft.

The bigger catch is that once your freeze is in place, you will be charged $10 for every “thaw,” the term for allowing someone to see your credit report information.

This may not seem too costly, but consider that many households have two adults, and thus two credit reports to freeze and thaw. That will add up to $60 to freeze the accounts, and another $20 for every time they need to thaw just one of the accounts. A new credit card will probably require at least one thawed account, and a car loan or home loan will likely require all three. Worse, setting up a freeze requires a paperwork hurdle. You’ll often have to send certified letters to the credit bureaus.

If you’re a victim of identity theft, the good news is that freezes and thaws are free. For theft victims, the freeze imposes no problem when it comes to applying for new loans and lines of credit. Instead of having to thaw your accounts each time you apply for a new line of credit, you will establish a PIN. When you apply for a new line, you will give this number to the creditor checking your credit. The bureaus will only reveal your credit information to creditors with your PIN. If you are the unfortunate victim of identity theft, you should freeze your accounts as soon as possible.

For other consumers, the decision to freeze or not is a little trickier. If you live in a state where freezes are free, you may as well give yourself the added protection. Just remember that you’ll have to unfreeze your accounts in order to apply for new loans. If you have to pay for freezes, it may turn into a money drain.

But, even in states where consumers are still paying for credit freezes, there are people who should still consider freezing their accounts: those who are mature credit holders who do not intend to take out any new lines of credit. For example, if you have all the credit cards you could want, you don’t plan to take out a new loan for a home or car, there is no harm in freezing your credit. In fact, it’s a good idea. Seniors often fit this description, and they are frequently victims of identity theft.

Freezing an account varies by state and bureau but each of the three credit bureaus provides guidance to help you freeze and thaw your accounts.  If you plan on freezing your credit, follow-up with each bureau for more information.

Published or Updated: March 22, 2013
About Rob Berger

Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.

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