Is Freezing Your Credit A Good Idea?
Identity theft is big business for criminals. According to the Federal Trade Commission, there were 4.72 million reports of identity theft and fraud in 2020 alone. Sadly, as each year passes, the number of people falling victim to this criminal activity continues to climb.
When many people’s identity is stolen, they freeze their credit in an attempt to prevent their personal information from being used to commit fraud.
But, is freezing your credit a good idea?
To answer that question, we’ll take a look at how credit freezes work and explore the pros and cons.
WHAT HAPPENS WHEN YOU FREEZE YOUR CREDIT?
When you put a security freeze on your credit report, it prevents people from being able to check your credit. This includes lenders, credit card companies, service providers, and others.
The purpose of doing this is to prevent people from fraudulently using your name to obtain credit. When you are ready, you can remove the security freeze to apply for a new credit card, loan, or something else.
It’s important to keep in mind that a credit freeze does not prevent someone from stealing your identity. Even if you have a credit freeze in place, someone could steal your identity and then use it to commit fraud at a later time after you have lifted the freeze.
It’s also important to understand that a credit freeze can’t protect everything. If someone steals your credit card information, for example, that person may still be able to make fraudulent purchases. And if your Social Security number is stolen, it could be used to file fraudulent tax returns or medical insurance claims.
HOW DO YOU FREEZE YOUR CREDIT?
The process to freeze or unfreeze your credit is simple and free, and it only takes a few minutes.
Contact the Credit Reporting Bureaus
The first step in freezing your credit is to contact each of the three credit reporting bureaus. These are the organizations that maintain your credit history. They include Equifax, Experian, and TransUnion.
You will have to contact each credit bureau separately. Contacting just one will only freeze your credit with that particular bureau. The three organizations don’t report credit freeze requests to each other.
Answer the Verification Questions
To verify that it is actually you requesting a credit freeze and not someone else trying to harm you, the credit reporting bureaus will require you to answer a series of security questions.
Request the Credit Freeze
After your identity has been verified, you can then request a freeze on your credit. Each of the three credit bureaus will provide you with a PIN when they freeze your accounts. Be sure to hang on to them. You will need them later to unfreeze your credit.
THE PROS OF FREEZING YOUR CREDIT
There are several important reasons why freezing your credit is a good idea. The process is quick and easy, and it can be easily reversed when you are ready.
Less Worry About Identity Theft
Although a credit freeze may not entirely stop someone from committing fraud with your personal information, it does make it more difficult for them to do so.
You Can Still Use your Existing Credit Accounts
You can still use any credit cards you may have when you freeze your credit. Other credit accounts—like personal loans, cell phones, utilities, etc.—will also be unaffected.
It’s Free
It doesn’t cost anything to freeze or unfreeze your credit. You can do it as often as you like without worrying about having to pay fees for the service. The federal government mandated that the service be free in 2018 through a law known as the Economic Growth, Regulatory Relief, and Consumer Protection Act.
It Doesn’t Expire (In Most States)
A credit freeze will remain in place until you lift it. There are some states, however, that will only allow you to freeze your credit for seven years.
THE CONS OF FREEZING YOUR CREDIT
If you are considering freezing your credit, there are a few important cons to consider. Everyone’s financial situation is unique, and it’s important to understand the negatives before making a decision.
You can’t Open New Credit Accounts
When you freeze your credit, you won’t be able to open new credit accounts that require credit checks. It could also cause additional problems since your credit may be checked for other things including:
Renting an apartment
Obtaining utilities
Pre-employment screening
Obtaining new cell phone service
You May Not Know When to Unfreeze Your Credit
A problem with unfreezing your credit is that you may not know how long you need to leave it unfrozen. If you are searching for a job, for example, a pre-employment check may need to be done. Employers may take several weeks to conduct a pre-employment check after an interview. Some employers may not bother to let you know if they have decided to hire someone else.
It’s Not 100% Effective
Although freezing your credit may deter some identity thieves, it may not be completely effective in stopping them. Savvy criminals may recognize that your credit is frozen when they try to open new credit accounts and simply wait a few months to try again.
You Need to Remember Your Pin
The PINs you are given by each of the three credit reporting bureaus are important keys you will need to unfreeze your credit. If you lose them, it could cause problems when you need to restore your accounts.
PROTECTING YOUR IDENTITY—THE SMART WAY
Identity theft is a very serious issue that affects many each year. While freezing your credit may be a good idea if your identity is stolen, it may not completely solve the problem. You may also need a theft recovery service, like IDSafeChoice from GHS Federal Credit Union to help you restore your good name.
Coverage for IDSafeChoice is affordable—only $2 per month. This low fee may also cover your spouse, dependents, and parents living with you or living in an elder care facility. It’s a small price to pay for the peace of mind it can provide.