Thinking About Freezing Your Credit? Here’s What You Should Know

If you’ve been keeping up with financial news in the United States, you know that as of September 21, 2018, placing a freeze on your credit is now free, as opposed to previously having to pay different fees in different states. According to Experian, “One of the three credit bureaus in the United States, credit freezing was designed to help consumers protect themselves from fraud and identity theft by preventing credit from being approved in their name.”

What does it mean to put a freeze on your credit?

A credit freeze simply means that you notify the three credit bureaus that you no longer want businesses or individual to access your credit history until you remove the freeze. According to Credit Karma, freezing your credit card goes into effect no later than five days after your initial request. In order to freeze your credit, it is recommended that you contact each credit bureau — Equifax, TransUnion, and Experian.

A credit freeze does not stop you from using your existing lines of credit.

Why would you freeze your credit?

Like we explained above, a credit freeze, also referred to as security freeze, has mostly been designed to prevent fraudulent activity and mitigate the damage a data breach could cause. In 2017, an Equifax data breach affected 143 million Americans who got sensitive information stolen, such as Social Security and driver’s license numbers. According to Experian, “You should consider freezing your credit if you are a victim of identity theft. Even if you only suspect you are a victim of identity theft but are not certain, it can still be useful to place a freeze on your credit file. You may also consider freezing your credit file if:

• You are receiving bills or collection notices under your name or another name at your address that aren’t yours.
• You see new inquiries on your credit report from businesses that you didn’t provide permission.
• Your bank notifies you about a fraud incident on your account.
• You receive a company notification letter where you are or could be a victim of a data breach.”

Even though this credit action is intended to protect users from fraud, there are a few other financial benefits from freezing your credit:

Can potential employers check your credit?

Yes, with your permission. Some people freeze their credit to prevent potential employers that use employment reports for background screening from viewing their credit report.

Can a credit freeze stop unwanted offers of credit?

Yes. Some consumers also freeze their credit to prevent credit card companies, lenders, cell phone providers, and even insurance agencies from getting access to their credit reports without explicit permission.

Freezing your credit: other things to consider

Before deciding to freeze your credit, there are some things you should keep in mind:

• Even though this varies by state, it can take up to seven years for a credit freeze history to be removed from your account
• Companies and lenders won’t be able to access your credit report, but they still have access to your criminal background and other public information
• If a company or employer is trying to get your credit report and is unable to, this might be considered a red flag for them

How long does a credit freeze last?

Just like freezing your credit, unfreezing (also known as thawing) your credit is also free in all 50 states. In order to unfreeze your credit, you will need to contact the three credit bureaus by telephone or online. At the moment of freezing your credit, you should have received a personal identification number (PIN), which will be needed to unfreeze your account. Keep in mind that your credit should be unfrozen within an hour, but it’s recommended to give yourself up to three days to effectively see this change on every site.

How do I replace a lost security freeze PIN?

Losing your PIN is not uncommon and it’s not the end of the world. However, you should know that credit bureaus will need to verify your identity before being able to unfreeze your account, which means you should give yourself some time and plan ahead before unfreezing.

Are you considering freezing your credit? As always, we strongly recommend talking to an expert beforehand to fully understand the pros and cons. Remember that every situation is different, and it’s always good to know all your options.

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LendingPoint is a personal loan provider specializing in NearPrime consumers. Typically, NearPrime consumers are people with credit scores in the 600s. If this is you, we’d love to talk to you about how we might be able to help you meet your financial goals. We offer loans from $2,000 to $25,000 with terms from 24 to 48 months, all with fixed payments and simple interest.