What Is a Credit Freeze and How Does It Work?
Your credit score is one of the most impactful determinants of your financial life, considering it is required for almost every financial decision you make, from getting a loan to renting an apartment.
Therefore, it’s crucial to understand different terminologies and processes related to your credit score. One of them is a credit freeze. In simple words, you can freeze your credit if you do not want unauthorized people to access your credit file.
Although the process is relatively simple, many people do not understand all the ramifications of freezing their credit. Let’s take a look at what a credit freeze is and how it benefits you.
What Is a Credit Freeze?
A credit or security freeze refers to the process of restricting access to an individual’s credit files. Only the credit holder — the individual the credit score belongs to — can authorize this freeze.
Freezing credit helps prevent identity thieves and hackers from opening an account or applying for credit using your name.
Good To Know
Keep in mind that a credit freeze does not mean no one can access your credit reports. Your credit history is still visible and available to companies with whom you have any existing credit associations. Moreover, government agencies that need to execute a search warrant or court order can also access your credit reports.
How Does It Work?
You have to freeze your credit by telling the three major national credit bureaus that you don’t want your credit reports to be accessible to anyone.
As discussed above, there are some exceptions to who can still access your information in case of a freeze. The credit bureaus will keep the freeze in place for the duration of your preference.
You can also choose to unfreeze your credit whenever you want. The good news is that the process costs nothing, so you can quickly freeze or unfreeze your account.
When To Freeze Your Credit
You should consider freezing your credit if you have recently been a victim of online fraud or identity theft. If you are not sure if you may be a victim of fraud, request a free credit report. Going through it will help you determine if there has been any unauthorized activity under your name.
Alternatively, you can set a security alert in place. In this case, lenders will call you to verify that it was actually you who applied for a loan.
Typically, you should opt for a credit freeze in the following situations:
- Unexplained collection notices or bills have been mailed to your home address in someone else’s or your name.
- New credit accounts that you don’t recognize or have not authorized have appeared on your credit file.
- Your credit union or bank has sent you an alert for fraudulent activity on one of your accounts.
- You have been the victim of a data breach.
Some experts say you should keep your credit frozen unless you need to use it.
Jim Droske, the president of Illinois Credit Services, told CNBC Select, “It’s the most secure thing you can do to protect your credit. I recommend keeping it frozen until you need to use it. Let’s face it, you know when you are going to apply for a mortgage, auto loan or credit card, so keep your credit frozen until you need it.”
Since credit freezing and unfreezing are free, you can do it whenever and as many times as you want without any additional expense. So, it shouldn’t hurt to keep your credit frozen unless you need it.
How To Freeze Your Credit
If you want to freeze your credit for any reason, you have to contact all three major credit bureaus through the following channels:
- Equifax: By calling at 800-685-1111 or going to the Equifax website
- Experian: By calling at 888-397-3742 or going to the Experian website
- TransUnion: By calling at 888-909-8872 or going to the TransUnion website
Once you are on the website, enter your name, date of birth, address and Social Security number. TransUnion and Experian will tell you to set a unique PIN to freeze your credit. You will later use this same PIN to unfreeze your credit, so don’t lose it. Equifax does not require you to use a PIN and will let you manage your security freeze using your username and password via your myEquifax account, among other options.
To freeze your credit completely, you have to do it from all three bureaus. The process is free.
How To Unfreeze Your Credit
Once you decide to unfreeze your credit, you have to contact the major credit bureaus again. When applicable, use your unique PIN to unfreeze your credit.
Keep in mind that you must do so in a given time frame. If you make a request to unfreeze your credit through a phone call, it will take place within an hour. Meanwhile, if you request this through the mail, the unfreezing will take place within three business days.
When To Unfreeze Your Credit
You might want to unfreeze your credit in the following situations:
- Applying for a loan: If you are applying for a loan, the lender will conduct a hard check on your credit. For that, you need to unfreeze your credit file. If your credit is frozen, the lender could deny your application.
- Getting a credit card: Likewise, if you want to get a new credit card, your credit report must be unfrozen so that the bank or credit card company can check your history.
- Searching for a residence: If you’re looking for a place to rent or buy, you should unfreeze your credit report since you’ll most likely undergo a credit check.
- Looking for a job: Unfreeze your credit file if you are looking for a job or might be up for a promotion at your existing workplace. Many employers require that prospective hires — and in some cases, candidates for promotion — undergo a credit check, and if your credit is frozen when they run the check, you may be turned down for the job.
Make sure you have written or saved your unique PIN somewhere. Otherwise, unfreezing your credit will become a complicated process requiring extra steps that could have been avoided if you were more careful with your PIN.
You should probably keep your credit frozen unless you need to undergo a credit check at your place of employment or when opening a new account. A credit freeze can help protect your identity and keep your credit files safe from suspicious activity, either in an emergency or as a preventative measure.
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- Experian. 2020. "How to Freeze Your Credit for Free."
- CNBC Select. 2021. "Freezing his credit helps this expert ‘sleep better’ at night—here’s why he says everyone should do it."