What is a credit freeze?


Credit freezes, first enabled through law in California in 2003, are now accessible to all consumers regardless of state-of-residence. 

This became possible in 2007, when the three major credit reporting bureaus — TransUnion, Experian, and Equifax — decided to allow consumers the right to freeze their reports regardless of state laws. 

What is a credit freeze, though, and what benefits does it bring?

The Nature of the Freeze

Credit freezes allow consumers to control who has access to their credit reports and history. In normal circumstances, the credit reporting agencies will provide consumer data to anyone who pays for access. 

If an individual institutes a credit freeze, however, access will be denied unless that person gives permission.

Benefits of a Freeze

Credit freezes are typically undertaken for only one reason: to help in the prevention of identity theft. Identity theft occurs when a criminal applies for credit cards or a loan under someone else’s name. 

If someone has instituted a credit freeze, banks and credit card companies cannot access that person’s credit, and will therefore not issue credit lines in that person’s name. 

While not a foolproof method to prevent identity theft, credit freezes certainly make it less likely that an individual will become a victim.

How Do I Freeze My Credit?

To completely freeze your credit, you need to contact each of the major reporting agencies. Each bureau has instructions to institute a freeze and generally require the creation of a personal PIN or password, and the payment of a small fee. 

To unfreeze your credit, you must go through a similar process and again pay a fee. Keep in mind that if you want to apply for a credit card or loan, you will first need to unfreeze your own credit.

As security measures, credit freezes provide a powerful tool for the maintenance of personal credit. In order to protect yourself even more, consider coupling a credit freeze with fraud alerts. 

Fraud alerts serve to notify lenders that they should take additional steps to verify your identity before they issue credit in your name. As with a credit freeze, you can set up fraud alerts through the three major credit bureaus. 

Written By Doug Matus

Written on September 10, 2017

Self Lender is a venture-backed startup that helps people build credit and savings. Comments? Questions? Send us a note at hello@selflender.com.

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