What is a Credit Freeze? How Securing Your Credit Report Can Prevent Identity Theft

When the credit bureau Equifax was hacked in 2017, I was worried that my information would be compromised — or someone would open a new credit card in my name. That’s why I decided a credit freeze was the best option for both myself and my husband. 

A credit freeze is a block placed on your credit report so lenders and creditors can’t access it. This means that no one can open a new loan, line of credit, or credit card in your name. Instituting a credit freeze won’t prevent identity theft or protect you from being scammed by clever hackers, but it can mitigate the negative effects of credit fraud.

A credit freeze effectively blocks anyone from opening loans or credit card accounts in your name by restricting access to your credit report.

I kept the credit freeze in place until we were applying for mortgages. The process was fairly easy — and I’ve heard that it’s gotten even easier since then. 

If you’ve never set up a credit freeze, it can seem like a daunting process. Fortunately, it’s so straightforward that anyone can do it, and I’ll show you how.

A credit freeze simply means that no one can open new types of credit in your name. It doesn’t affect your existing credit accounts in any way.

While a credit freeze can stop some types of fraud, it doesn’t mean that you’re in the clear. That’s because a credit freeze only stops a hacker or thief from opening new accounts. Someone could still steal your current credit card information and run up a huge balance.  

Even if you have a credit freeze set up, that doesn’t mean that you can stop paying attention to your credit report. Remember, fraud isn’t the only thing that can affect your credit score. You could accidentally forget about an account and incur a late payment, which can drag down your credit score. Or you could run up a huge balance, causing a high credit utilization percentage. 

Checking your credit report often can ensure that your own mistakes don’t hurt your credit too badly.

Freezing your credit doesn’t change your credit score. However, not having a credit freeze in place could result in fraud that can hurt your score. For example, if you have fraudulent charges on your account, your credit score can be negatively affected, at least temporarily. That’s why some experts recommend setting up a credit freeze, especially if you’re in the market for a major loan.  

Years ago, it used to cost money to institute and remove a credit freeze. That’s why few people used them unless they were recent victims of identity theft. The exact cost varied depending on the state you lived in, but typically cost between $10 and $15 per credit bureau. If you wanted to freeze your credit across all three bureaus, it could cost you $30 or more. 

However, in 2018, Congress passed the Economic Growth, Regulatory Relief and Consumer Protection Act, which made credit freezes — and thaws — free. There is no limit to how many times you can set up or remove a credit freeze; there will never be a charge. This is another major reason why more consumers should freeze their credit.

When I had my credit freeze, I was concerned that it would be a hassle to remove it. But removing the credit freeze was fairly straightforward and easier than I imagined it would be. While I haven’t put my credit freeze back, I still recommend it for anyone who’s not currently looking to open a new loan or credit card.

You can place a credit freeze quickly and easily by contacting the credit bureaus. You’ll have to do it a few times, but your credit reports will be on lockdown after the process is done.

Here are the steps to take:

1. The first step is to contact each credit bureau: Experian, Equifax, and TransUnion. The easiest way to institute a freeze is online. However, you could also call the credit bureaus. You have to contact each credit bureau separately to place a freeze, since they’re independent and don’t communicate with each other. 
2. To set up the freeze, you will have to provide your personal information, including your full legal name, birthday, Social Security Number or Individual Taxpayer Identification Number, address, and contact details. If you’re doing this online, the credit bureaus may also ask you to pick a username and password to create an online account. with them.  This can make it easier to unfreeze or thaw your credit later. Plus, some credit bureaus also provide free access to your credit score.
3. By law, instituting a credit freeze can take no more than one business day if done by phone or online, or no more than three business days if done by mail. You can double-check in a few days to verify that the freeze has gone through.

If you’re married, you can also institute a credit freeze for your spouse. Credit reports and scores are individual, so even if your credit is frozen, it doesn’t mean your spouse’s credit is. Plus, if someone racks up a large balance on a shared credit card, it can still affect your credit, even if your credit is frozen. 

If you’re about to apply for a credit card, loan, or line of credit, you will have to remove your credit freeze before completing the application. Here’s what you should know about removing a credit freeze:

If you want to apply for a loan or credit card, you will have to remove your credit freeze. Removing the credit freeze is free.

To remove a freeze online, you should visit each credit bureau’s website and log onto your account. There you should see a button or link that says “unfreeze my credit.” When you click the link, make sure you know whether it’s a temporary thaw or a permanent unfreeze.

There are rules on how long it can take a credit bureau to unfreeze your credit. If you request an unfreeze online or over the phone, they must unfreeze it within one hour. If you do it by mail, they must do it within three business days. It’s always best to unfreeze your credit online, especially if you’re in a time crunch. Also, before you complete a credit application, you should double-check to make sure the request has been processed.

There are two ways to lift a credit freeze: a permanent removal or a temporary thaw. Just like it sounds, a thaw means that your credit freeze will be lifted for a certain number of days.

Many consumers choose to thaw their credit if they need to apply for a loan but still want the full protection of a credit freeze. Because a thaw only lasts for a limited period of time, you should make sure you know when the lender is going to check your credit. If you miss that timeline, you’ll have to process the thaw request again.

While you used to need a PIN to thaw your credit, that is no longer the case.

Credit bureaus also offer credit locks, which are similar to credit freezes. If you create a credit lock, no one will be able to access your credit report from that bureau. However, credit locks are not free. In fact, they can be fairly pricey and cost between $25 and $30 a month. Credit locks are individual to each credit bureau, so it could cost you almost $100 a month to lock your credit with all three bureaus. 

One of the only differences between a credit lock and a credit freeze is that a credit bureau will contact you if someone tries to view your credit when you have a credit lock set up. Also, a credit lock will be applied as soon as you complete the request. Credit freezes always take at least one day to be applied. 

If you want to protect your identity and credit, then using a credit freeze is one of your best options. But it’s not your only tool; fraud alerts are another popular way to safeguard your money and your personal information.

Key Differences Between the Tools

Fraud alerts can come from your credit bureau or from third-party companies that have your credit information on file. Some banks and credit card issuers may also provide fraud alerts as a special feature.

Only the three official credit bureaus can set up a credit freeze. There is no time limit on a credit freeze; it will remain active as long as you keep it there. 

Putting a credit freeze in place does not mean that the credit bureau will contact you if something suspicious happens on your credit report. The credit bureau is not responsible for monitoring potential fraud. A credit freeze is only one part of keeping your finances safe and secure. 

That’s where fraud alerts can help and provide more security for consumers. Fraud alerts can let you know what’s going on with your current accounts and if someone has potentially stolen your information.

How to Set Up Fraud Alerts

Some people get credit freezes and fraud alerts confused. There are some similarities, but fraud alerts are more designed for people who are at an increased risk of identity theft. You can set up a fraud alert with each credit bureau, just like a credit freeze.

A fraud alert service can help you put more safeguards in place. When someone tries to apply for a loan or credit card, the fraud alert will tell the creditor to double-check your information to confirm you’re actually the one applying for the product.

A credit freeze doesn’t prevent your existing card information from being stolen, and it will not alert you if someone makes fraudulent charges. However, it can prevent new loans, lines of credit, or credit cards from being opened in your name.

While credit freezes can last forever, fraud alerts last for just one year. You can renew a fraud alert after that point. One of the biggest differences between a credit freeze and a fraud alert is that if you put on a fraud alert at one credit bureau, they must reach out to the other credit bureaus and tell them to place a fraud alert too.

Credit freezes, on the other hand, must be done separately if you want to freeze your credit with all three bureaus. 

There are two basic types of fraud alerts: regular and extended. Regular alerts last one year, extended alerts last up to seven years.

An extended fraud alert can last up to seven years. However, they’re harder to obtain than normal fraud alerts. You must have had your identity stolen and have filed a police report or a report through the Federal Trade Commission (FTC). It’s free to file either of those two reports, and it’s also free to file an extended fraud alert.

If you sign up for an extended fraud alert, you will also be removed from mailing lists that send unsolicited credit and insurance offers. This will last for five years and can also prevent someone from opening accounts in your name.

If you’re a service member going on active duty, you can place a special active duty fraud alert on your accounts. An initial active duty alert can last up to one year but can be renewed for the entire duration of your deployment. Like other fraud alerts, this is also free to set up. If you set up an alert, you can create a reminder on your phone to extend the alert if you’re still on active duty.

One of the main differences between credit freezes and fraud alerts is that you only have to contact one credit bureau to set up an active duty fraud alert. That bureau will then communicate with the other credit bureaus. Active duty service members are often at risk of having their identity stolen and can find it hard to monitor their credit. To help with this, they are eligible for free credit monitoring through the three credit bureaus, so take advantage of that if you qualify. 

If you’re a very cautious person, you could freeze your credit while you’re not actively applying. Having a credit freeze set up is like that old-timey saying: “An ounce of prevention is worth a pound of cure.” Although, I admit, having your credit frozen most of the time does seem like a lot of cure!

Credit freezes are especially useful for elderly consumers and young children, who may be more likely to be victims of identity theft. In fact, other relatives may be liable for stealing your child’s or parent’s credit information and opening new accounts in their name. 

Setting up credit freezes for an underage child or incapacitated parent can also stop any potential issues. Since they’re not likely to need a new loan or credit card, a credit freeze won’t be inconvenient for them. However, even if you don’t fall into one of those two categories, having a credit freeze set up can help you avoid costly and time-consuming issues. 

It definitely helped my husband and I find some peace of mind when we placed a credit freeze. Maybe it can do the same for you.