A credit freeze, which is sometimes referred to as a security or report freeze, is a free tool that gives you the option as a consumer to restrict access to your credit report. This action makes it more of a challenge for identity thieves to open a new account in your name. Creditors need access to this information to issue a lending product in most situations, so it can be a helpful tool to use if you’re concerned about a data breach or someone having unauthorized access to your credit report.
That doesn’t mean you are 100% guaranteed to stop a new account from opening without permission. Most creditors, but not all of them, may wish to see this information before extending credit. You will want to keep a proactive eye on the information your report contains to ensure it is accurate.
It is also essential to remember that a credit freeze will not stop any prescreened offers that you receive in the mail, through email, or over the phone. If you want to stop receiving this junk mail, then you’ll want to call 1 (888) 567-8688. You’ll be given the option to prevent those offers for five years or permanently, but companies can still send you something that is not based on a prescreening of your credit.
List of the Pros of a Credit Freeze
1. A credit freeze does not impact your credit score.
When you talk to the major credit reporting bureaus in the United States about instituting a credit freeze, then you will not be impacting your score. What you are doing is limiting the number of agencies that can have access to your information. There are fewer hard inquiries that can happen with this advantage, especially if someone without permission attempts to open an account for some reason under your name.
You’ll maintain a healthy credit profile and preserve your overall FICO score by choosing a credit freeze. Then you can manage access by choosing when to have it frozen in case you need a loan for some reason.
2. You will block a majority of agencies from viewing your credit report.
A credit freeze will stop most agencies or firms from having access to your credit report, even if someone has all of your information and applies for a new account. There are still some circumstances where access will not be restricted since the information can be released to existing creditors or debt collectors who act on their behalf. Government agencies with a search warrant, administrative order, court order, or subpoena can access the data as well.
If you owe child support or have similar obligations to pay, you cannot stop the appropriate agency from accessing your credit report either.
3. It is up to you to lift a credit freeze.
When you ask the three major credit reporting bureaus to institute a credit freeze, then this action will stay in place permanently until you say otherwise. You’re given a PIN or password that you can use to temporarily stop this process so that you can apply for a lending product like a mortgage or a vehicle loan. The request is processed in an hour if you make it online or over the phone.
This advantage means that you can work with lenders to unfreeze only the credit reports they need to process your information.
4. You get to have peace of mind about your financial situation.
If your credit score is below 600, then a credit freeze might seem like a waste of time because the odds that someone will issue you a new line of credit is minimal. When your score is above 700, then you need to worry about what might happen if someone has your personal information. By placing a freeze on your report, you will know that the information is secure except for those who need access to it for legitimate reasons.
Since this option is free, it may be worthwhile to institute it today even if you don’t suspect identity theft. Freezing your credit will stop impulsive purchases, credit card applications, and other financial issues that could set you back on your overall savings goals.
5. Credit freezes can be requested for your immediate family members.
In the wake of the Equifax data breach that exposed tens of millions of consumer records, Congress passed laws that make it free to freeze the credit reports of your children as well. Although it doesn’t seem like your kids would become the target of an identity thief, a clean credit profile with enough verifiable money (real or otherwise) can be enough for a lender to issue an account.
All they need to do is substitute a different birth date and they’ve got some action. About 25% of kids will be victims of this action before turning the age of 18. A credit freeze will give them some protection, even if it may be considered a drastic move by some industry experts.
6. A credit freeze will last indefinitely in most jurisdictions.
Once you request a credit freeze on your account, then it will last indefinitely. If you take your PIN to a potential creditor, then they can use it to access your information to know if you can qualify for a loan or a new line of credit. You don’t need to worry about taking it down unless you cannot find your password to give to a potential lender.
Even if that situation were to occur, you could still contact each credit reporting bureau directly to establish your identity and remove the freeze. Although this process could be inconvenient in some situations, many consumers find that the extra bit of work needed to stop someone from opening new accounts is worth the hassle.
7. It is cheaper than using a credit monitoring service.
Even before the legislation that stopped the credit reporting bureaus from charging a fee for this service, a freeze was far cheaper and more effective than the services of a monthly credit monitoring agency. Now that it is a free service, everyone should consider using it even if there are some inconveniences associated with this option. As long as you take down the freeze with at least an hour before you intend to apply for credit, then there should be no disruptions to the process. You can then reinstitute the freeze in the future to continue protecting your identity.
8. You can still access your free credit reports.
When there is a freeze on your account at one, two, or all three of the major credit reporting bureaus, it is still possible to access your information through the annual free credit report that you receive in the United States. You can also see this data if there is fraudulent entries that you need to contest, especially if you use the online method to initiate this process. You’ll want to request the credit reports once every four months instead of all three immediately so that you can keep an eye on your credit profile.
9. Your existing accounts are not impacted by this action.
If you currently have several lines of credit that you use for a variety of purposes, then a credit freeze will not impact them at all. You can continue to use your credit cards, a home equity line of credit, and similar products as you normally do. Although you might not receive a credit line increase with the freeze in place or get other financial perks that are based on your FICO score, you won’t immediately lose access to the cash flexibility that you want.
10. The rules for credit freezes are established by federal law.
The nature of the rules in the financial sector cause several changes to occur over time. A credit freeze today will not be the same process in the future. The benefit that you have when choosing this option is that the guidelines in the United States are controlled by the federal government instead of the private agencies that manage this data. Although you’ll need to contact each one since it doesn’t operate like a fraud alert, you don’t need to worry about an unexpected change from one of the bureaus because of this advantage.
List of the Cons of a Credit Freeze
1. You must contact all three credit reporting bureaus to protect your identity.
If you have a verifiable issue with identity theft where fraudulent activity exists, then making one report of this incident will filter to Equifax, Experian, and TransUnion. The credit freeze works a little differently. You’ll need to contact each agency in person, by phone, or online to make sure that your report is frozen. Two of the agencies require you to sign up for a personalized account to manage your information.
Although this disadvantage is relatively minor for most people, it will take about an hour to go through all of your signup necessities. If you don’t have Internet access, then you can mail a letter with the needed information to each bureau – but that will take substantially more time. You need to supply your personal info and Social Security number.
2. It does not create a verification process.
A credit freeze locks down your reports so that it becomes inaccessible except for very specific situations. It does not offer you the benefits of a fraud alert because the credit bureaus and creditors don’t need to take steps to verify your identity. This option is about preventing the misuse of your existing accounts, while the alerts are more about stopping someone from opening a new account.
3. Credit freezes make it inconvenient to apply for new credit opportunities.
When you decide that a credit freeze is the best option to protect your information, then it becomes almost impossible to start a new line of credit or take out a loan. That also means anything else that requires a credit check will require you to “thaw” your report at least temporarily. That means applying for life insurance, starting your utilities, or landing that dream job will require some proactive measures on your end to ensure that your data is accessible. You might even find some difficulties at work trying to get the clearances you need since this blockage is in place.
You might be surprised at how many soft credit pulls happen without an adverse impact on your credit score.
4. You will not stop fraud on your existing products.
If you implement a credit freeze, then you are protecting yourself against future new accounts from being opened in your name. What you will not be doing is stopping fraud that already exists. If someone has your credit card number, then they can make unauthorized purchases on your account even with your report frozen. You’ll need to continue watching your financial history and profile to ensure that someone isn’t taking advantage of your strong FICO score.
5. This process is only effective if you freeze every credit profile in your home.
The reality of our current existence is that online public records make it very easy for identity thieves to find out everything about you and your family. If you suspect that someone has your information already, then a credit freeze could be a meaningful step to take so that your data receives the protection it needs. What you may not see until your start this process is that everyone, including your spouse or significant other, children, and other dependents must receive the same amount of protection for this to be a truly effective option.
It takes about 20 minutes to institute a credit freeze through each reporting bureau. If you have a spouse and four children, then that means you’re spending up to six hours of your time instituting the freezes that will keep your financial profile safer. Then you’ll go through the process again when credit is necessary. If you apply for new credit frequently, this process can be rather inconvenient.
6. It doesn’t provide a complete lock of your credit profile.
Credit freezes in the past operated more like the modern credit lock does today. After September 2018 when the laws changed for this product, a locking service charges about $20 per month to give you the option to allow or deny access to your report. If a lock is in place, not even you can get to your personal data unless you turn that option off. That option is the fastest and easiest way to stop unauthorized access, but it comes with a charge that you won’t need to pay for a credit freeze.
7. It may not be the right choice for the average person.
If you are extremely concerned about the idea of having someone open a new account in your name, then a credit freeze is the right choice to make. For the average person, your best defense against identity theft is proactive monitoring. You’ll want to keep an eye out for new accounts that are not yours, withdrawals you do not recognize, and bills received at your address with someone else’s name on them – which can be common if you rent.
Here are some of the other events that you’ll want to watch for to prevent identity theft proactively.
- Hard inquiries on your credit report from a company you don’t recognize.
- Notifications from a business of any size that says you might have become the victim of a data breach.
- Calls from a collection agency about a past-due amount that is not your responsibility.
- Medical bills for services that you did not receive.
- Having more than one tax return filed under your name.
Verdict on the Pros and Cons of a Credit Freeze
A credit freeze makes sense to have because of all of the issues with data breaches that occur each year. Even one of the major credit reporting bureaus experienced this problem, releasing over 100 million records to unauthorized parties because of a digital intrusion. You can protect yourself from having a new account opened with this one simple step.
Thanks to legislation in recent years, there is no longer a $10 charge to place a security freeze on your report. It used to be another $10 to temporarily remove it. This process is now free for everyone.
The pros and cons of a credit freeze will continue to be an essential component of financial management as even more of our information becomes available online. Continue to review your FICO score, get your free credit reports each year, and immediately notify lenders or request investigations into any inaccurate or fraudulent data you discover associated with your profile.
Blog Post Author Credentials
Louise Gaille is the author of this post. She received her B.A. in Economics from the University of Washington. In addition to being a seasoned writer, Louise has almost a decade of experience in Banking and Finance. If you have any suggestions on how to make this post better, then go here to contact our team.