When to Freeze Your Credit

Dec 24, 2018 by

credit freeze

Your credit, frozen.

Most states allow consumers to “freeze” their credit. But before you put your credit on ice, be sure you know all the ramifications and costs of frozen credit. And understand beforehand what you must do to thaw your credit and how long the process may take.

What’s a Credit Freeze?

In general, once your credit is frozen, no new credit accounts can be opened in your name, because nearly all credit providers would want access your credit report before approving an application for new credit from you (or someone impersonating you). No report, no credit. This makes a credit freeze a useful tactic in helping control identity theft damage.

Cautions Before Freezing Credit

These days all sorts of parties are pulling your credit report, with permission you’ve granted in the fine print somewhere. For example:

  • Insurance providers
  • Landlords
  • Employers
  • Banks
  • Utility companies

So while freezing your credit probably will prevent the opening of new credit accounts in your name, in some states a freeze may also make impossible or challenging changing insurance companies, landlords, employers, or banks. If a utility company can’t examine your credit history, you may be required to make a cash deposit with the company before service is turned on.

Typically (again, credit freeze laws vary by state) you can temporarily suspend your credit freeze so that, say, an employer where you’re interviewing for a job can access your credit report. But freeze suspensions will probably cost you money, and may take days to go into effect.

When to Consider Freezing Credit

After researching the costs and time factors, consider freezing your credit when:

  • You suspect someone has stolen or will steal (say your purse or wallet has disappeared) your identity.
  • As a last resort to help control borrowing beyond your means to repay. Once your credit is frozen, you won’t be able to borrow more than the combined limits on all of your existing credit accounts. Ask a trusted friend or family member to establish and keep the password needed to thaw your credit, and agree to ground rules upfront about the circumstances under which your partner would give you the password.

Other factors to keep in mind:

  • Freezing your credit only prevents new credit accounts from being opened; existing accounts are unaffected. If an ID thief has already opened accounts in your name, you must take additional action to shut these down. (Learn more through the “Identity Theft” link under Rip Offs on Money Counselor’s “Free Resources” page.) Also, companies with which you’ve already established credit will not be frozen out; they’ll still have access to your credit report, as would collection agencies working on their behalf.
  • In most states, if you’re a documented identity theft victim, freezing your credit costs you nothing.
  • Freezing your credit has no affect on your credit score or your ability to get the free credit report to which you’re entitled annually from each of the three credit reporting bureaus.
  • For a freeze to be effective, you must invoke it with each of the three bureaus—TransUnion, Experian, and Equifax—and pay any required fees to each.

How to Freeze Your Credit

You can learn more about fees and how to freeze credit in your state at Consumers Union.

Might a Fraud Alert Be a Better Solution?

If you think someone has stolen your identity or is about to, you can ask the reporting bureaus to attach either an “initial” or “extended” fraud alert to your credit file.

An initial fraud alert lasts 90 days and requires that creditors use “reasonable policies and procedures” to verify identity before issuing credit in your name. What you and the creditor consider “reasonable” may differ, so this is hardly a fail-safe remedy.

If you’re a documented ID theft victim, you can provide an Identity Theft Report to the credit reporting bureaus and ask for an extended fraud alert. Once that’s done, creditors must actually contact you or meet you in person before establishing a new credit account in your name.

A credit freeze is more likely than an alert to prevent fraudulent credit accounts from being opened in your name, but the freeze may cost you some money and could lead to more hassles if legitimate access to your credit report is blocked.

Have You Ever Frozen Your Credit?

Please share any experience you have with freezing and thawing credit. Was it a hassle? Effective? Costly?

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