Protecting Your Credit 101 – How credit freezes work
In the overly complicated and confusing world of identity theft, simple solutions can seem impossible to find. If only there was a way to instantly protect yourself from credit fraud by spending a few minutes online.
Well fortunately, there is.
Credit freezes are one of the few things that provide a reliable sense of security against fraudsters, and the best part is—it’s free.
If you’ve never heard of a credit freeze, understand that this isn’t some kind of product promotion. Credit freezes are your federal right to protect yourself against identity theft.
What is a credit freeze?
Under the Fair Credit Reporting Act (FCRA), consumers have the right to place a credit freeze on their credit report to help prevent identity theft.
When you place a credit freeze, the credit reporting agencies (Equifax, Experian, TransUnion, etc) are required to deny access to your credit report to anyone who is not authorized. This means that lenders and other creditors cannot access your credit report to open new credit accounts or loans in your name, without your consent.
The FCRA provides several important legal protections for consumers and forces creditors to take reasonable steps to verify your identity before approving the credit application if a fraudster applies for credit in your name.
So, hypothetically, even if a criminal is able to access your credit file, the liability is on the creditor and not on you (as long as you report the fraud within a specific time period).
If you are concerned about protecting your privacy, your credit, or your finances, you should absolutely have a credit freeze in place.
What exactly does a credit freeze protect you against?
When a lender/creditor pulls a credit report, they are looking to view the payment history, credit scores, debts, and personal records of that person. This is to determine if a person is trustworthy enough to pay back a loan.
A credit freeze makes it so lenders/creditors cannot view the credit report of whatever bureau you’ve placed a freeze with (Equifax, Experian, TransUnion, etc.) As a result, they will not approve any new lines of credit since they can’t verify your ability to pay them back.
It’s worth mentioning that lenders could still approve someone without checking their credit report. However, this would mean they’re risking their own money by giving away a loan to someone without verifying their credit history—which lenders aren’t known to do.
Even if a lender willingly ignored a credit freeze, that would be in direct violation of the Fair Credit Reporting Act, and a person may be able to take legal action to protect themselves from fraud liabilities.
How to place a credit freeze?
Let’s clear up common misconceptions about credit freezes to get eliminate some of the confusion surrounding them.
- Each credit bureau has its own unique freeze (i.e., if you place a freeze with TransUnion, you must also place one with Experian, Equifax, etc.
- Not all creditors/lenders pull from the same organization (some may pull from Experian, others TransUnion, and some may even pull from all three.
- There are a lot more than just 3 Credit Bureaus (TransUnion, Experian, and Equifax are by far the most popular, but there are hundreds of data reporting agencies.
- A Credit Freeze is NOT a Credit Lock or a Fraud Alert (these are similar, but also very different from a freeze. Locks and Fraud Alerts offer less protection and may even cost you money.
To place a freeze, you must visit the website of the agency that provides it. It’s important to note that not all credit reporting agencies offer credit freezes, and the process for placing and lifting a freeze may vary depending on the agency.
To make things easy—we’ve made a list of all the companies that offer a freeze as a service. We’ve also made step-by-step walkthroughs of how to activate and deactivate the freeze for each specific site.
Companies that offer credit freezes
Click on each one to learn more about the organization, how to place a freeze with them, and how to lift it when you need to apply for credit.
Innovis
NCTUE (National Consumer Telecom & Utilities Exchange)