With data breaches of major companies such as Home Depot, Target and Aetna in the news nearly every week, there’s a growing trend for consumers to “freeze” their credit. Is this a smart idea for you? Here’s what you need to know.
A credit freeze, also called a security freeze, prevents anyone from accessing your credit report. (The only exception is for companies with which you already have a relationship, or for government agencies.) A credit freeze makes it harder for identity thieves to open new accounts in your name, since they will not be able to have a credit check run.
If you’ve been a victim of identity theft, or know someone has gained access to your Social Security number, you should definitely freeze your credit. You can also freeze the credit of a minor child to prevent his or her identity from being stolen. Finally, if you are the guardian of someone who is mentally or medically incapacitated, freezing his or her credit is a good idea.
If your credit or debit card information has been breached, you don’t need to freeze your credit. That information isn’t enough to open new accounts or steal your identity.
Some consumers freeze their credit because they’re paranoid about identity theft. While the risk of identity theft is real, freezing your credit can be overkill. First, you have to pay to place a credit freeze (although the fee is generally minimal) and to have it lifted. Since you’ll have to freeze your credit with all three national credit reporting agencies, fees can add up.
More important, a credit freeze requires some advance planning. When you request a temporary lift of the freeze so someone can access your credit report, there’s up to 3 days of processing time. Nor can you request a temporary credit freeze lift on weekends, holidays or outside business hours.
A credit freeze delays financial decisions, such as applying for a mortgage or refinancing, comparing interest rates, renting an apartment, buying a car or opening any new credit account.
The method of freezing your credit differs from state to state as well as for each of the three major credit reporting companies. In general, you’ll have to provide your name, address, birthdate, Social Security number and other personal information, and pay the fee (usually $5 to $10). If you’ve been a victim of identity theft, the fee is waived, although you may need a police report as proof.
You will need to place a credit freeze with each of the three major credit reporting companies. Find out how to freeze your credit with each company here:
When you place the credit freeze, the credit reporting company provides a personal identification number (PIN) you’ll need to remove or temporarily lift the credit freeze. For a temporary lift, you must provide the name of the company and/or person who needs to access your file. Contact the credit reporting company and provide the identification and information they require.
There is a less drastic option: a fraud alert. Fraud alerts placed on your credit file require anyone checking your credit to take special precautions to verify your identity. The person will need to call you at a number you provide to ascertain that you yourself requested the credit. You only have to place a fraud alert with one of the three major credit reporting agencies; the other two will be notified and they will automatically place fraud alerts on your files.