With identity theft on the rise, more people are looking at ways to protect their identities. Options like identity theft protection and simple credit monitoring can certainly help. But what if you want to take more drastic measures?
One drastic measure you can take is to freeze your credit. A credit freeze, also called a security freeze, places a hold on your credit file. You can freeze your credit with any or all of the three major credit reporting bureaus: Equifax, Experian, and TransUnion.
Once your credit file is frozen, inquiries into your file will be denied. Because potential lenders need to pull your credit file to see if you qualify for a loan, they won’t issue a loan to someone with your Social Security number when they can’t pull your credit file.
(Note: You’ll have to freeze credit files separately with each bureau.)
The main difference between credit monitoring and a credit freeze is that a credit freeze can keep thieves from taking out credit in your name. Credit monitoring catches them after the fact and can sometimes remedy the situation quickly.
Is freezing your credit right for you? If so, how do you go about freezing your credit? Here’s what you need to know.
Pros and Cons of a Credit Freeze
Like every financial decision you’ll make, freezing your credit has pros and cons.
- Nearly always stops identity thieves from taking out credit in your name;
- Remains in effect until you decide to “thaw” your credit;
- Provides more protection and usually costs less than a credit monitoring service;
- Doesn’t affect your credit score;
- Usually free if you’ve been a victim of identity theft.
- It can be expensive to place a freeze and to lift it again. 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. As a result, a security freeze could cost you $30 because freezing just one of your reports is minimal protection against identity theft.
- Blocks you from taking out new credit in your name until you remove or temporarily lift the freeze;
- May need to pay to freeze and/or unfreeze credit or temporarily lift the freeze;
- Can take up to three business days to lift the freeze, which can delay your credit application;
- Does not protect existing bank or credit accounts from fraud.
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.
Whether a credit freeze is right for you depends on many factors. If you’ve been a victim of identity theft, getting your credit frozen may be easier and will almost certainly be cheaper. Plus, if you think your stolen ID may be floating around out there, a credit freeze can protect you from the hassle of dealing with more fraudulent accounts.
If you haven’t been the victim of ID theft, a credit freeze can give you peace of mind. If you don’t apply for credit often and have no plans to apply for new credit anytime soon, a credit freeze may be cheaper for you than a monthly credit monitoring service.
Carefully look at the pros and cons of freezing your credit to ensure you make the right choice for your financial and personal situation.
Steps to Freezing Your Credit
If you decide to freeze your credit, one great thing is that the process has gotten easier in recent years. As identity theft and credit fraud has become more common, credit reporting bureaus have made the process of freezing and lifting freezes on your credit files easier.
Here are the steps to take if you decide to freeze your credit:
- Find out your state’s fees. Each state sets its own laws for fees that credit bureaus can charge for placing and lifting a credit freeze. You can find Experian’s helpful state-by-state list here.
- Gather your personal information. To fill out online credit freeze forms, you’ll need personal information like your Social Security number, birth date and, possibly, driver’s license number.
- Fill out credit freeze forms for each of the three major credit reporting bureaus. Click the linked bureau names to be taken directly to their credit freeze applications: Equifax, Experian, TransUnion
- Pay attention to instructions in the application for how to lift a credit freeze. Be sure to keep a secure file with your application PIN and other credit freeze information, so you can lift the freeze when necessary.
- Relax. Your credit is now safe until you should decide to lift the freeze.
Alternatives to a Credit Freeze
Freezing and thawing your credit is not the only option. You can also monitor your credit report. While monitoring your credit doesn’t provide the same level of protection, it does have some benefits. First, you can monitor your credit for free with services like Credit Karma and Credit Sesame. Second, you don’t have to worry about thawing your credit when you apply for a loan.
We’ve done an in-depth comparison of a credit freeze vs credit monitoring.
Learn how to track all three of your credit scores from the Dough Roller Money Podcast: