The massive Equifax data breach that occurred last year prompted many consumers to place a security freeze on their credit files in order to protect their identity. This freeze blocks lenders from pulling your credit reports, which can help prevent data thieves from opening new credit accounts in your name.
Banking reform legislation that passed in May included a provision that will enable you to place a security freeze on your credit files free of charge. Currently, the price of a credit freeze ranges from $2 to $10, depending on the state.
This provision takes effect on September 21, at which time you can freeze and unfreeze your credit files with each major credit reporting bureau (Equifax, Experian and TransUnion) free of charge. In essence, a security freeze puts a “lock” on your credit report. This means that data thieves are unable to view your reports, gain access to new loans or open more credit accounts in your name.
A Costly Freeze Process
To receive full protection, you currently have to place security freezes on your credit accounts at all three of the credit reporting bureaus. This can be costly, adding up to as much as $60 to freeze and unfreeze all your credit files, which is one reason why security freezes have been rarely used by consumers so far. Once these fees are eliminated, it’s expected that more consumers will use security freezes to help protect their identity.
In addition to the fees, another major drawback to security freezes has been the cumbersome process of lifting one. For example, if your credit file is frozen and you need to make a last-minute purchase on new credit, you might not be able to do so. Under the legislation, the FTC will establish a webpage with a link to each of the three major credit reporting bureaus so you can place and lift your security freezes in a matter of minutes.
Starting on September 21, when you request a security freeze at each of the credit reporting bureaus by phone or electronically, they must put it in place within one business day, or within three business days if the request is made via postal mail. Note: You will still have to make separate security freeze requests at each credit reporting bureau.
Stronger Fraud Protection
Security freezes are generally considered to be a stronger fraud prevention tool than simply placing a fraud alert on your credit files because they prevent the credit reporting bureaus from releasing any information in your files without your permission. Also, you generally have to renew fraud alerts every 90 days, while security freezes remain in effect until you lift them.
While security freezes are a useful tool to prevent fraud, they aren’t perfect. For example, some financial companies can still access your credit reports even with a freeze in place. If you’ve done any previous financial business with a company, they can still see your credit files. So can federal, state and local agencies and law enforcement, as well as child support agencies and private collection agencies.
Here are a few more things to keep in mind about security credit freezes:
- They do not affect your credit score or prevent you from receiving a free annual credit report.
- They don’t prevent you from opening new credit accounts, renting an apartment or home, or applying for a job. However, you may need to lift the freeze temporarily in these situations.
- They don’t prevent you from receiving pre-screened credit offers. You can opt out of these by calling 888-5OPTOUT or visiting OptOutPrescreen.com.
Not a Cure-All, But Still Valuable
While credit security freezes aren’t a cure-all for preventing identity theft, they can provide valuable added protection against identity thieves. Once they are free of charge, you’ll have one more good reason to implement this fraud prevention technique.