Since your credit rating can have a major impact on your financial state, preserving your credit in a good standing is crucial. If you wish to stop unauthorized users from accessing your credit information, a term known as a "credit freeze" is a safety mechanism you may want to consider. It's pretty easy to freeze and unfreeze your credit, plus it helps to comprehend how things work so you can decide when it's the best course of action.
A Credit Freeze Explained
You can limit who can see your credit records by imposing a credit freeze. If obtaining new credit entails a hard check into your credit file, freezing your credit can help avert identity thieves from getting a report in your name.
However, consider that restricting access to your credit file doesn't make it impossible for anyone to see your credit history. Companies that you have credit relationships with may still have access to your credit file despite a credit freeze in place. Plus, your credit reports will be accessible to government bodies carrying out judicial orders or search warranties.
How a Credit Freeze Works
You are simply informing the three major credit reporting agencies (Equifax, Experian, and TransUnion) about your intention to freeze your credit. Once again, when a freeze is in effect, there are several exceptions to who can access your credit file.
When you impose a credit freeze, it can remain in effect for as long as needed. Thanks to a legislation reform from 2018, freezing your credit is now absolutely free. Before, freezing and unfreezing your credit came with a cost.
A credit freeze won't increase or decrease your credit score or prevent you from receiving free credit reports from major credit reporting bureaus through nnualcreditreport.com. However, for lenders to examine your credit file when you opt for new credit, you must remove the credit freeze.
How to Freeze Your Credit?
To freeze your credit, just get in touch with each of the three main credit bureaus or proceed online. You will be required to provide your name, address, date of birth, SSN, and other personal details in order to freeze your credit. Experian and TransUnion both mandate you to set a special PIN to freeze/unfreeze your credit. To minimize the risk of identity theft, you need to freeze your credit with each of the three credit bureaus since it's free of charge. Take into account that a credit freeze doesn't affect your score. Your credit rating will still change depending on the data being reported to credit bureaus.
Unfreezing Your Credit
You might likely determine that the credit freeze is no longer required since a new loan request may require you to temporarily release the credit freeze. You will need to get in touch with each credit bureau separately if you want to unfreeze credit. With TransUnion and Experian, you'll have to enter the PIN you created previously.
When you request a credit agency to remove your credit freeze, it has a set amount of time to comply. The freeze should be removed within an hour for queries raised over the phone or online. In the case of a mail-in request, it can take up to three business days.
Pros and Cons of Freezing a Credit
It can be useful to be aware of the benefits and drawbacks of freezing your credit reports. If you're unsure whether to freeze your credit or not, consider the factors listed below:
- It safeguards your credit file and helps prevent fraud
- A credit freeze/unfreeze is free of charge
- Online credit freezing and unfreezing is quick, simple, and easy
- A credit freeze won't impact your credit rating
- Even if your credit file is frozen, access to it won't be entirely restricted
- Before securing a new loan, you have to unfreeze your credit
If you're worried about identity fraud and don't have any immediate plans to request new financing, a credit freeze can be a wise decision. In light of the rising incidence of fraud and identity theft, it gives your credit reports extra security. A good feature is that there are no fees associated with implementing a credit freeze/unfreeze. However, there are further ways to guard your credit history from unwanted access.
An Alternative to Credit Freeze
Placing a fraud warning on your profile is another option to freeze your credit. Over a year, a fraud alert can prevent unwanted access to your credit file. It can be safeguarded for seven years by a prolonged fraud alert. If you've already experienced fraudulent activity, prolonged fraud alerts might be the better choice. You must first file an identity theft report before contacting one of the three reporting agencies to set up the alert. The reporting agency you inform must notify the other bureaus as well.
In contrast to a credit freeze, fraud alerts won't totally restrict your credit files. However, they do demand that lenders go the extra mile to confirm your identity before approving financing in your name. If you'd prefer not to go through the hassle of freezing/unfreezing your credit, this can be an easier route.