Why We Should All Put a Credit Freeze in Place

By: Patrick Cote, CFA, CFP®

We believe credit freezes are one of the most effective, yet least-discussed, techniques to prevent identity theft.  They might be little-known because no one, including the credit bureaus, actually makes any money from a credit freeze – unlike credit locks, they are now provided for free.   Putting a credit freeze in place prevents the credit bureaus from sharing your credit report with any third parties, which makes it hard to establish new credit.  The freezes are very helpful for each of us, because they help to prevent a significant loss of time and/or money due to identity theft.

A credit freeze places a lock on your credit, so that no one can have credit issued in your name without having the credit freeze removed.  This is effective at preventing one of the more common types of identity theft, which is to apply for credit in someone else’s name.  Unfortunately, our personal information, including Social Security Numbers, seems to be readily available for bad actors.  Once they have that info, they can pretend to be us and apply for credit using our actual credit rating.  They can then use that credit to get loans or to buy things that are eventually sold for cash.

While there are protections in place to help us if someone fraudulently applies for credit under our name, we would still be looking at a lot of time, and probably some money, that would be required to undo the damage.

It is far easier to simply set up the credit freezes to prevent the fraud in the first place.  It is actually now free to do so.  You simply need to place the freeze at each of the three major credit bureaus:

https://www.equifax.com/personal/credit-report-services/credit-freeze/

https://www.experian.com/freeze/center.html

https://www.transunion.com/credit-freeze

When you will legitimately need to apply for credit, say for a mortgage refinancing or buying a car, you would simply log back into the three credit bureaus and temporarily lift the freeze.  There is no charge to lift the freeze and you would be able to apply for credit within an hour.  It does mean you would have to wait a bit if you were tempted to do an impulse buy requiring new credit (such as applying for a store credit card), however, it is probably a good thing to create a short delay for large impulse buys!

There is little difference between a credit freeze and a credit lock, other than that credit bureaus charge for credit locks and allow for instant locking/unlocking of credit.  The credit freeze can take up to 24 hours to lock your credit file and up to one hour to unlock.

Given that there is such a high level of identity theft nowadays, it makes sense for most of us to put the credit freezes in place.