Identity theft and data breaches are more common than ever, leaving many people wondering how they can protect their financial information. One of the strongest tools available is something called a credit freeze.
But what exactly does that mean, and when should you consider using one? Let’s break it down.
What is a Credit Freeze?
A credit freeze restricts access to your credit report, keeping lenders and creditors from seeing your credit file. This prevents new accounts from being opened in your name and data breaches from occurring due to fraudulent activity.
Compared to credit monitoring, which serves as an alert to notify lenders about suspicious activity, a credit freeze takes it a step further by not only sending out an alert but also completely blocking access. A credit freeze is taking action to protect your credit.
How Does a Credit Freeze Work?
You can place a free credit freeze on your account through nationwide credit bureaus like Equifax, Experian, and TransUnion. Locking down your account means:
No new credit applications can be approved during the freeze period
Your existing accounts and credit cards are not affected
Your credit score does not change
The Benefits of a Credit Freeze
Protection Against Fraud: Credit freezes prevent criminals from opening loans or credit cards in your name.
Peace of Mind: You can rest easy knowing there’s a strong layer of protection after a breach or if your Social Security number is compromised.
Free and Easy: Unlike some monitoring services, freezes don’t cost anything to put in place.
When Should I Use a Credit Freeze?
A credit freeze can be a smart move in several situations:
After a Data Breach: If your personal information was exposed, a freeze helps prevent fraud.
Victim of Identity Theft: Freezes stop thieves from taking out new accounts under your name.
Not Applying for Credit Soon: If you rarely open new accounts, it’s an easy way to stay protected.
Added Security: Even if you haven’t been compromised, a freeze can offer peace of mind.
The Cons of a Credit Freeze
Doesn’t Stop All Fraud: While a credit freeze protects against most fraudulent activity, it won’t prevent misuse of your current credit cards or bank accounts.
Extra Step for Credit Applications: If you want a new credit card, mortgage, or car loan, you’ll need to lift the freeze first.
Requires Management: You’ll need to keep track of your PINS or passwords to make changes later.
Who Can Still See My File During a Freeze?
Under federal law, some groups are not blocked by the freeze on your account and can still see your credit report without you having to lift the freeze. These include:
Lenders tied to your existing accounts
Specific government agencies, like those handling child support
Credit monitoring services you’ve chosen to use
Employers running background checks (must have written permission)
Landlord property managers
Insurance companies checking your credit for policy pricing
You can request to see your files during a freeze
Credit Freeze Rules and Consumer Rights
Because credit freezes are protected by law, the bureaus must follow certain procedures:
Activation Timeline: Phone or online requests must be processed within one business day. Mailed requests must be completed within three business days.
Confirmation Letter: Within five business days, the bureau must send you a written notice confirming the freeze. It will also explain how to lift or remove the freeze.
Online Access: Credit bureau websites must allow you to request freezes, fraud alerts, and active-duty alerts for service members.
Lifting a Freeze: If you request a temporary lift online or by phone, it must be completed within one hour. Mailed requests must be processed within three business days.
Impact on Credit Scores: Freezing your credit has no effect on your credit score and doesn’t prevent you from using your existing accounts.
How to Place a Credit Freeze
Contact Equifax, Experian, or TransUnion directly online, by phone, or by mail.
Provide your identifying information, including your Social Security number and date of birth.
Create an account and receive a PIN/password to manage your freeze in the future.
Alternatives to a Credit Freeze
If you’re not ready to freeze your credit, you have other options. In the event of suspicious activity, a fraud alert lets lenders know they need to verify your identity before approving an application.
If you’re just looking for an extra layer of protection, credit monitoring is a service that tracks activity on your credit reports. This system notifies you of changes, new accounts opened, or personal information showing up on the dark web.
Is a Credit Freeze Right for You?
A credit freeze is a powerful way to protect yourself from identity theft. It’s free, it won’t affect your credit score, and it gives you control over who can access your file. While it may require an extra step if you apply for new credit, the security it provides is well worth it.
If you’re unsure whether a freeze is the right move for your situation, our team at AMG Finance can help. Schedule a consultation with one of our Financial Advisors, Credit Specialists, or Loan Officers to discuss your options and find the solution that best fits your needs.