What does it mean when you freeze your credit report? Simply put, freezing your credit report means blocking it from any type of inquiry that will be made to your account. This means nobody – lenders, landlords, employers, not even you – will be able to access your file.
In 2003, the state of California passed the first credit freeze law and since then, there are now 38 states in the US where the credit freeze law is practiced.
Today, the three major credit bureaus (Equifax, Experian and TransUnion) have made provisions for anyone who wants to freeze their credit report regardless of which state they live. Why would some people want to freeze their credit report?
Why Freeze Your Credit
People freeze their credit to completely protect themselves from fraud and identity theft. This is because while your credit is on “freeze”, no one, not even you, can open new accounts in your name. If you want to open a new account with a bank or a lender, you need to advise the credit bureaus that you wish to lift the “freeze” order on your credit by providing them your special Personal Freeze ID Number.
The length of time it takes for the credit freeze to be lifted depends on each state. To be sure, one should notify the bureaus at least a couple of days in advance before applying for a new credit. Requesting for a lift or “thaw” on your credit can also cost you from $10-$12 depending on your state.
Differences Between Credit Freeze and Fraud Alert
Is a credit freeze the same as a fraud alert? A fraud alert is placed on your credit if you suspect you have been a victim of Identity Theft or fraud. New accounts can still be opened in your name but creditors would be more careful about granting their approval since they will be making sure that you are the rightful owner of the account. On the other hand, when you place your credit on “freeze”, any inquiry on your credit is strictly forbidden.
The process of placing one’s credit report on fraud alert can be done by phone while a credit freeze can only be acquired by sending a written request via registered mail. Along with the letter of request, 2 copies of proofs of residency should also be included.
Unlike a fraud alert which is free, a credit freeze usually comes with a charge – from $10 to $12 to each bureau- which can cost you from of $30 to $36 for all three major credit bureaus to freeze your report. However, if you’ve been a victim of ID theft, you can ask for a credit freeze for free and some states waive their charges for senior citizens.
In addition, fraud alerts expire after 90 days and you need to make a new request if you want to continue to put it on alert. A credit freeze is permanent unless you decide to lift it or request that your credit be “thawed”. In South Dakota, a credit freeze will last only for seven years or until lifted.
Should You Freeze Your Credit Report?
No doubt, putting your credit report on freeze would give you an additional protection against the risk of identity theft and fraud. If you’re not going to apply for a new account for the whole year, it is a good idea to freeze your report. However, if you’re planning to apply for a new loan or a credit card anytime soon, you may consider freezing your report at another time. Certainly, the fee for lifting the freeze on your report is worth the expense if it means saving yourself from the trouble of fraud and ID theft.