3 Reasons You Should Freeze Your Credit
Doesn't it seem like there's a new data breach in the news each week? The reality is sadly much worse. According to the Identity Theft Resource Center, there was a record-high 783 breaches tracked in 2014, a whopping increase of 27.5 percent from 2013. That's an average of 15 breaches per week.
If your personal information has been stolen recently, you may have been advised to "freeze your credit." But what exactly is a credit freeze? Is it right for you, or is there a better option for your situation? Let's discuss this strategy so you can make a well-informed decision.
What is a security freeze?
A security freeze, sometimes called a credit freeze, is a block that prevents people from accessing your credit report without your permission. It will remain until you remove it or choose to temporary lift it if you need to apply for a line of credit or a credit-dependent service.
Why would I want to freeze my credit?
-- You're concerned about identity theft. If your wallet has been stolen or a service you use often has been hacked, a security freeze could be a great way to add a layer of protection to your credit. Since you have to approve each instance when your credit is checked, you can know for sure whether you or a fraudster applied for a new line of credit and can take the appropriate steps.
-- You want greater control of your credit. Hate the idea of anyone checking your credit without your permission? A security freeze can help you keep track of every instance that your credit is checked.
-- You won't need to apply for credit in the near future. Going out of the country for a while? Giving up credit while you work on improving your financial situation? Freezing your credit reports can be a great "set and forget" strategy to increase the protection on your credit while you focus on other things.
Why would I not want to freeze my credit?
-- It could complicate your life. Having a security freeze on your reports can be a pain because the credit reporting companies aren't allowed to release your credit report without your consent. This means applying for new credit cards, government services, rental housing, cellphone plans, utilities, loans and other services could take longer than usual. In other words, while it should prevent others from opening accounts in your name, it'll also make it harder for you to do so as well.
-- It may not necessarily prevent identity theft. Keep in mind that while security freezes can stop new accounts from being created, it may not necessarily prevent thieves from taking control of your current accounts. In fact, a security freeze could prevent you from monitoring your own credit, which is a huge aspect of protecting your identity. As credit monitoring companies usually pull their information straight from the bureaus, you may need to temporarily lift your freeze or forego using services that allow you to keep an eye on your credit scores and credit reports.
-- There are other options. If freezing your credit sounds like more than you need, you could place a fraud alert on your credit file. Unlike a security freeze, it's free for all consumers, and you only need to request it from one bureau, which will then alert the other two credit bureaus. Your credit file will still be accessible, and creditors will be mandated to take reasonable steps to verify your identity before granting you credit.
How can I freeze my credit?
If you want to freeze all three of your reports, you'll need to talk to each of the credit bureaus (Equifax, Experian and TransUnion) separately. In many cases, unless you're a victim of identity theft, you'll have to pay a small fee to freeze your credit. However, if you're constantly worrying about identity theft, the peace of mind you'll get by freezing your reports may be worth the money.
The bottom line: If you're a victim of identity theft or won't be applying for credit for a while, a security freeze could be a smart way to create additional protection on your credit. However, as with most things, this strategy has pros and cons. In addition, taking steps to proactively protect your credit could help prevent identity theft from happening in the first place and negate your need for measures like security freezes. Be sure to evaluate your personal situation and consider whether freezing your credit is a good option for you.
