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When Should You Freeze Your Credit?

Published March 10, 2021

4 minute read

David Ning

By David Ning

Freezing your credit is one of the biggest and best weapons in your arsenal against the specter of identity theft. However, it seems very few people know you can even do such a thing — let alone when it makes the most sense to use it. Basically, a credit freeze makes it impossible for anyone — including you — to open new credit in your name. That means scammers can’t open a credit card, get new cell service, or even take our a loan under your name. It won’t matter if they know every detail of your personal or financial life, or can produce fake IDs to match them. Frozen credit is actually frozen.

Doesn’t that sound good? Why doesn’t everybody just freeze their credit?  Well, it can also be quite inconvenient. To place a freeze on your credit, you must contact each of the three credit bureaus and request that they freeze your credit. You will also need to pay a small fee and fill out the required paperwork online. The credit freeze lasts indefinitely too. That means you will need to “thaw” if again whenever you want to use your credit again. You can usually undo this quickly online or over the phone. However, it could take a few business days if you mail in your request.

Since a credit freeze can also affect your non-credit decisions (buying insurance, getting security clearance, or getting a new job), it isn’t the answer for everyone. After all, I doubt you want to explain to a potential employer why HR couldn’t pull your credit. However, here are four common situations when you might want to freeze your credit.

After a Death

A deceased alert is a credit freeze requested by the executor of an estate. It will prevent malicious people from attempting to steal the identity of the recently deceased. This kind of credit freeze is different from a security freeze. With that freeze, you voluntarily freeze your own credit. In this case, though, it’s freezing someone else’s credit. Regardless, it’s an important method of preventing fraud.

While the Social Security Administration is required to alert the credit bureaus of a death, it can take some time for the information to work through the system. This is especially true since the pandemic, since the government is overloaded with requests of all kinds. Instead, it’s a good idea for executors to contact all three credit bureaus personally. If you are an executor of any estate, make sure that the deceased’s credit can’t be accessed by would-be criminals. Untangling that potential mess after the fact is not a fun experience.

After Being The Victim of Identity Theft

This is why most people freeze their credit. Unfortunately, it’s a little like closing the barn door after the horse has already bolted. At least it does give victims some peace of mind about any possible future thefts. In addition, those who have already been through the nightmare of a stolen identity are allowed to freeze (and thaw) their credit for free. Previous victims already know that scammers have access to identifying information about them.

If you’ve previously been a victim of identity theft, you’re statistically more likely to be targeted again in the future. While freezing your credit might make your life slightly more inconvenient, it’s best to play it safe.

If You Believe Your Data Has Been Compromised

Personal data from private websites seems to get hacked on a regular basis. There’s basically a news story about it every other week. If Experian can get hacked, then I don’t think any website is truly safe. If a site that you frequent alerts you that your information with them has been compromised, placing a security credit freeze on your accounts could be a good idea. You’ll also want to figure out if just freezing your credit is enough. You might also want to use a fraud alert service, depending on how sensitive your stolen information was.

Credit Freeze For Minors

Children are, surprisingly, often victims of identity theft. This is partially because they don’t really have a need to access their credit reports.  Very few people actually look at a minor’s credit report. In the event that their identity is stolen, the theft could go unnoticed for years. Placing a credit freeze on your child’s report doesn’t really have the downsides an adult would face. Just leave it frozen until they need access to their credit as an adult.

How to Thaw Your Credit Freeze

There will eventually come a time when you need to thaw your credit. Perhaps you wanted to refinance your mortgage. Or you’re changing jobs and your new employer needs to run your credit. In any case, it’s best to ask the person running the credit which credit agency they are pulling the credit report from. Since you have to thaw each agency’s credit separately, it can save you time and money to just thaw the one that’s being pulled. When we did our mortgage refinance, the lender used the TransUnion credit report to figure out our creditworthiness. If my credit was frozen, then I only needed to contact TransUnion to thaw it. There was no need to call the other two agencies.

The Bottom Line

While a credit freeze is not an all-purpose solution to the problem of identity theft, it can offer some insurance if you have reason to believe your financial date might be compromised. It’s a little bit of a hassle to setup and manage, sure. However, it will totally stop anybody from using your information to get credit. Most people use credit freezes as a temporary solution while they ensure their accounts and information is entirely safe. Even if you decide to use it on a more on-going basis, it’s not the worse financial plan in the world. For many people, it’s worth the effort.

Frozen Credit Card

Shutterstock

David Ning

Experienced Finance Writer

David is a published author, entrepreneur and a proud dad. He firmly believes that anyone can build a solid financial foundation as long as they are willing to learn. He runs MoneyNing.com, where he discusses every day money issues to encourage the masses to think about their finances more often.

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