Credit Freeze – Block Thieves, Protect your Credit with a Security Freeze

Last Update: 9/21/2018

In September 2017, Equifax got hacked affecting 143 Million customers. (Almost everyone!) Equifax is offering complimentary identity theft protection.

As you probably know, security breaches at retail companies, banks, and even government agencies have been making their way to headlines rather frequently within the past few years.  At this point, if you are not concerned about identity fraud, you should be. Just this past week, Americans found out that an attack on the Office of Personnel Management had impacted 14 million more people than initially reported.

Given the growing market for personal data, consumers need to be knowledgeable about how best to protect themselves. While most of us do not have control over  whether or not our data is sold (or whether or not a certain organization is breached), our biggest concern should be to determine how best to keep our data secure from identity theft.  What are the options for protecting ourselves against fraud?

Credit Monitoring

What is it?  A credit monitoring service essentially tracks your credit report at the major credit bureaus and  immediately notifies you (via email, text, or mail--depending on your selected preference)  in the event of any suspicious activity

In Practice: Most breached organizations have been offering an olive branch “solution” by offering a few years of credit monitoring services at no cost.  The reason why this isn’t a comprehensive solution is because credit monitoring services are not preventative. Instead, credit monitoring ensures that you are notified if any identity theft occurs. Should you fall victim to identity theft,  a credit monitoring service will help to guide you through the long and complex procedures of  patching up any damage to your credit score and ensuring that credit bureaus are on top of eliminating the fraud.

Bottom Line:  If you have already been subjected to identity theft, credit monitoring services may be worth considering--especially if they are free or available to you at a low cost.

Fraud Alerts

What is it? A fraud alert will send a notification to any potential creditors or lenders telling them to contact you to verify your identity  prior to granting any credit in your name.

In Practice: This is relatively simple to set up if you contact one of the credit bureaus online and answer procedural questions regarding your credit history. Fraud alerts are free, but last for only 90 days. Another caveat: even if you have a fraud alert on file, lenders and service providers are not legally required to gain your approval before granting credit in your name.

Bottom Line: Because of how they work in practice, we consider fraud alerts to be almost useless.

Recommended: Credit Freeze

Though not many people know about it, the credit freeze (sometimes called a security freeze) can be a very effective.

• Starting September 21, 2018, the Economic Growth, Regulatory Relief and Consumer Protection act went into effect, making Credit Freeze FREE

What is it? A credit freeze prevents any prospective creditors from viewing a credit file unless permission is given when the owner deliberately unfreezes the file in advance.

In Practice:

• Given this degree of control, someone with a credit freeze has more preventative power against fraud than someone who simply signs up for credit monitoring services.
• There are side benefits too: since you would have to deliberately unfreeze your file each time you apply for a new line of credit, it serves as a barrier against any consumption behavior that could lower your credit score. For instance, if you have a tendency to apply for loans or credit cards when it isn’t truly necessary, a freeze will make it much more inconvenient for you to follow through on this tendency.
• A freeze also prevents a thief from opening a Social Security online account with your stolen personal information. Or better yet, block Electronic access to your Social Security Record.

Does a credit freeze affect my credit score?

Per the FTC: No. A credit freeze does not affect your credit score.

A credit freeze also does not:

• prevent you from getting your free annual credit report
• keep you from opening a new account, applying for a job, renting an apartment, or buying insurance. But if you’re doing any of these, you’ll need to lift the freeze temporarily, either for a specific time or for a specific party, say, a potential landlord or employer. The cost and lead times to lift a freeze vary, so it’s best to check with the credit reporting company in advance.
• prevent a thief from making charges to your existing accounts. You still need to monitor all bank, credit card and insurance statements for fraudulent transactions.

Sounds great, but how does one go about setting up a freeze on their credit file and how does it work if you need to unfreeze your credit file?

1. Apply for the freeze

Start by notifying the credit bureaus (usually online, in some cases by phone or in writing) that you wish to initiate a credit freeze on your file. Once your application is processed, you will receive a PIN that can be used to unfreeze your credit file when you need to. Though in some states, credit bureaus may allow freezes to be placed for free, there can be fees of $5 to $10. To maintain the highest degree of security, BuyVia recommends setting up a credit freeze at the four major consumer credit bureaus--Trans Union, Experian, Innovis, and Equifax. Most companies from whom you would request a line of credit will use at least one of these credit bureaus. Some will use several.

NCTUE is the National Consumer Telecom and Utilities Exchange, Inc. a nationwide, member-owned and operated, FCRA-compliant consumer reporting agency that houses both positive and negative consumer payment data reported by its members, such as new connect requests, payment history, and historical account status and/or fraudulent accounts.

Here is where you can start to follow through on step 1 with each of the credit bureaus:

• Trans Union: https://www.transunion.com/securityfreeze
• Innovis: https://www.innovis.com/personal/securityFreeze
• Experian: https://www.experian.com/freeze/center.html
• Equifax: https://help.equifax.com/app/answers/detail/a_id/159
• NCTUE: https://www.nctue.com/consumers
• ChexSystems: https://www.chexsystems.com/

2. Unfreeze or Temporarily Credit Freeze Lift when you need to

            If you do need to unfreeze your file in order to gain new credit, go ahead and find out which credit bureau supports the  company you’re trying to gain credit from.  You can do this by contacting the company directly or researching a bit on your own.  Be aware that sometimes, you will need to unfreeze your file at more than 1 bureau. After this, you should contact the credit bureau(s), using the PIN you were given when first setting up the freeze and within a day,  your file should be unfrozen.  Each time you request to unlock your file, you can determine a time period for which your file will be unlocked. This can range from a period of one day to multiple weeks, depending on how long you need to unlock your file.

   3. Refreeze

Refreezing your credit file will be automatic as long as you choose a set period. If you have not set a time period for the file to refreeze, you will need to pay the previously mentioned freezing fee, unless you have qualified for free credit freezes. Regardless, as long as you don’t unlock your file more than a few times per year, the total cost should not be burdensome.

   4. Stay Smart

A credit freeze won’t guard you against absolutely all types of fraud, so continue to be proactively defensive. How can you do that? There are resources that check for suspicious financial activity in committed under your name through companies like ChexSystems or Lifelock.  It is also a generally wise practice to request copies of your credit report every few months and spend some time reviewing it. Annualcreditreport.com gives you a free copy every year to help you out. This way, you will be able to check for any unusual records in a reasonable period of time. Try to do this every few months rather than every year or so.  If you wait too long, there may be a more burdensome number of entries to look through and you may have trouble remembering some of your own financial activity.

5. What it may not protect

There may be some accounts that are not protected by a credit freeze.

• Opening a Checking account
• Payday loans
• Title loan
• Getting Medical work done

An identity theft protection service may be able to help warn out when these types of accounts are open fraudulently under your name.

Freezing The Credit of Minors - Children

Thieves can and do use the pristine credit reports of kids to do their crime. Some states let parents create a credit file for their kids and to then freeze it, while other states do not. Make sure you have copies of their Social Security Card and bith Certificate.  The Federal Trade Commission has helpful tips on protecting your child's credit.

• Equifax lets you protect your minors credit, in any state. They do require a lot of documentation
• Transunion lets you check for a credit file, but will only lock credit reports in states that have a law
• Experian will send a free copy of minors credit report and will freeze it. You do need to pay for this.
• Innovis lets you protect your minors credit, in any state

In conclusion: There are a lot of competing offers out there regarding your financial security, but not all of those services (even if you pay a good amount for them) will do much to guard you against identity fraud.  However, the credit freeze is a rather straightforward option that offers much more control and protection over your credit file. Now that you’ve heard of it, it may be worth setting up a credit freeze as a practical security measure.

Social Security Account Setup

While we are on the subject of protecting you from identity theft.  If you have not already setup your Social Security Account, you should set one up before a thief makes one before you.

Be sure to enable the option: You may add an extra level of security to your account by entering an upgrade code that we will send you in the mail

You cannot create an account online when you credit report is frozen, either unfreeze it temporarily or visit a local Social Security office.

Setup IRS PIN (IP PIN)

Setup your IRS Protection PIN. You need this PIN when you submit a tax return. The PIN changes annually and must be retrieved by logging into irs.gov. It prevents others from filing fake tax returned under your social security number.

• An Identity Protection PIN (IP PIN) is a six-digit number that prevents someone else from filing a tax return using your Social Security (SSN) number or Individual Taxpayer Identification Number (ITIN). The IP PIN is known only to you and the IRS. It helps us verify your identity when you file your electronic or paper tax return. Even though you may not have a filing requirement, an IP PIN still protects your account.

Additional Resources:

• FAQs about Security Freezes
• Detailed prices for Equifax Credit Freeze

Do you plan on taking action against fraud? Have you been a victim of identity theft? Share with us your thoughts, experiences, or questions in the comments section.