The Pros and Cons of Freezing Your Credit
One of the most critical things you can do to prevent identity thieves from opening credit accounts in your name is to place a credit freeze on your accounts. Consumer credit reporting organizations are prohibited from providing the contents of a credit report to anybody who requests it. Lenders are unlikely to offer credit to you – or anybody claiming to be you – without that credit file.
In other words, a credit freeze serves to prohibit the opening of new credit accounts in your name.
Credit freezing (also known as a security freeze) is becoming more and more necessary. We are becoming more exposed to fraud and identity theft since practically all of our financial and personal information is stored on the cloud. In reality, identity theft cost the economy $16.8 billion in 2017, with 16.7 million victims.
The fact that Equifax, one of the main credit reporting organizations, was hacked serves as a cautionary note. Because of the loss of social security numbers and other personal information, someone might have all of the information they need to take your identity. To be clear, a credit freeze will not prevent you from identity theft, but it will make it more difficult for them to create bogus credit accounts in your name using your stolen identity.
With the number of identity theft victims at an all-time high, it’s prudent to take precautions to safeguard your financial assets. Is it, however, worthwhile to put your credit on hold?
Credit freezes used to be expensive, but credit reporting companies are now compelled by law to provide them for free. While freezing your credit may seem to be a no-brainer, let’s look at the benefits and drawbacks so you can make the best choice possible.
The Benefits of Credit Freezing.
- When you freeze your credit, it makes it more difficult for someone to open a bogus credit account in your name.
- A credit freeze provides you with the assurance that your credit report is safe.
- A credit freeze has no effect on your credit score or your ability to utilize current credit accounts.
- Credit freezes are now completely free of charge.
- Because lifting a freeze takes around 20 minutes, freezing your credit will prevent you from applying for a new credit card impulsively at a shop.
- Credit freezes are indefinite in most states, so you won’t have to worry about them expiring until you decide to remove them.
The Drawbacks of Credit Freezing.
- The effectiveness of a credit freeze cannot be guaranteed.
- To place a credit freeze and later to release the freeze, you must contact each credit reporting agency separately.
- You’ll need to prepare ahead if you want to create a new credit account (mortgage, credit card, auto loan, etc.) since you’ll need to obtain a temporary credit freeze lift.
As you can see from the list of perks and drawbacks, freezing your credit has a lot of advantages, while the disadvantages are primarily about convenience. I believe it is a little fee to pay for the peace of mind it provides.
If you’ve ever had to dispute anything on your credit report or deal with a fake account, you’ll understand why putting a credit freeze in place is time well spent. The trouble of contesting an inaccuracy on your credit report pales in contrast to the time it takes to seek a credit freeze from the three credit agencies.
Here’s what you need to know if you’re ready to put your credit on hold.
How to Put Your Credit On Hold
When you’re ready to freeze your credit report, call or go online to the sites and numbers listed below to contact the credit bureaus and request a credit freeze. It is more convenient for me to complete the procedure online.
- Equifax: www.equifax.com or 1-800-685-1111
- Experian: 1-888-397-3742 (online) or 1-888-397-3742 (phone).
- TransUnion: 1-888-909-8872 (online) or 1-888-909-8872 (phone).
You’ll be given a PIN after you’ve verified your identity and submitted your request. Keep the PIN in a secure location. Before you open new credit accounts, you’ll need this PIN to unfreeze, or thaw, your credit report. Keep in mind that you must call each of the major credit bureaus separately to freeze and unfreeze your information.
Even if your credit has been frozen, you should still get a free credit report every six months from www.annualcreditreport.com to ensure that everything in your credit file is correct. It’s important to remember that businesses might mistakenly record a timely payment as being late. A credit freeze isn’t a replacement for regularly checking your credit report.
While the process of freezing your credit takes time, you can be certain that you will be safeguarding yourself and your loved ones if you choose to do so.
Other Methods To Protect Your Credit.
It’s a good idea to use safe passwords on all of your banking, email, and social media accounts in addition to a credit freeze. You will be a less appealing target for identity theft and credit fraud if you make it more difficult to be hacked.
To maintain and generate safe passwords for all of my accounts, I personally use and suggest a password manager. Although it is difficult to totally avoid the risk of identity theft, it is prudent to minimize it as much as possible.
Limiting the quantity of personal information you provide online is another approach to protect yourself. If your security question for several sites is “What is the name of your dog?” for example, don’t broadcast your dog’s name on social media every day.
Freezing your credit isn’t a foolproof method of preventing identity theft and credit fraud. However, it is helpful in stopping fraudsters from creating credit accounts in your name. There’s no excuse not to use credit freezes now that they’re free.
The procedure of putting a credit freeze in place and then removing it might be cumbersome. But it’s nothing compared to dealing with someone else creating accounts in your name (do you have time to make a police report?).
As a result, freeze and monitor your credit reports to protect yourself and your loved ones.