What's a Credit Freeze and When Should I Use One?

Data breaches have affected millions of people in recent years. Social Security numbers, birth dates, addresses, and driver's license numbers have all been exposed in hacks. If your personal information was taken as part of a data breach, someone has stolen your identity, or you have reason to believe that you're likely to become the victim of identity theft, you should initiate a credit freeze. A credit freeze prevents a thief from opening up accounts in your name and ruining your credit.

Credit freezes—often called "security freezes"—basically seal your credit history. The freeze prevents a credit reporting bureau from releasing your credit information to a third party. So, if a thief tries to use your Social Security number and other personal information to apply for a mortgage loan or another form of credit, the creditor would reject the application because it couldn't check your credit.

Exceptions to a Credit Freeze

A credit freeze generally doesn't have an impact on your existing accounts.

A Credit Freeze Doesn't Affect Your Current Accounts, Like Your Credit Card Accounts

A common misconception is that a credit freeze means you can't use your current forms of credit, like a credit card. But your credit report isn't accessed when you purchase something with a credit card. So, freezing your credit file doesn't affect your ability to use your existing accounts.

Freezing your credit also won't prevent misuse of your current accounts. If the thief stole your credit card information, that person can use your existing credit card during a credit freeze.

Existing Creditors Can Still Access Your Credit History

Even under a credit freeze, an existing creditor can access to your credit report for certain types of account review, collection purposes, fraud control, or related activities. For example, the following entities may still access your credit report during a freeze:

• a collection agency acting on behalf of an existing creditor, and
• state or local agencies, such as law enforcement and child support agencies.

When to Use a Credit Freeze

It is generally advised that you request a credit freeze at the three national credit reporting agencies (Equifax, Experian, and TransUnion) if:

• you know someone has stolen your identity
• you've been told that your personal identifying information has been compromised
• if you suspect someone has stolen your Social Security number and other information, like your date of birth, that can be used to open credit in your name, or
• you want to be especially cautious when it comes to your credit files.

How to Set Up a Credit Freeze

You may request a security freeze by contacting Equifax, Experian, and TransUnion individually. You can make your request:

• online
• by certified mail, or
• by calling the credit bureau.

You must make separate freeze requests with each credit bureau.

How to Temporarily or Permanently Lift the Freeze

The freeze generally remains in place until you choose to lift or "thaw" it. When you place a credit freeze on your file, you'll receive a personal identification number (PIN) or password that you can use to:

• permanently lift the freeze or
• temporarily lift the freeze for a specific party or amount of time.

Under federal law, the bureau must lift the security freeze not later than:

• one hour after receiving the request, if you make the request by toll-free telephone or secure electronic means, or
• three business days after receiving the request, if you make the request by mail. (15 U.S.C. § 1681c-1).

Cost to Set Up a Credit Freeze

In the past, the cost of imposing a credit freeze varied between states. It typically ranged between $3 and $10 for each credit reporting agency. Lifting the freeze temporarily or removing the freeze altogether also used to cost a fee.

Now, however, thanks to the federal Economic Growth, Regulatory Relief, and Consumer Protection Act (Senate Bill 2155), placing and lifting a credit freeze is free in every state. (15 U.S.C. § 1681c-1).

Getting Help

To learn more about how to protect yourself if someone steals your identity or what to do after your personal information is compromised in a data breach, go to Identitytheft.gov. Identitytheft.gov is the federal government's main resource for identity theft victims.

You can get a personal recovery plan, find sample letters to send to your creditors, and get an Identity Theft Report. The website also provides valuable information about what to do after your identity is stolen, other possible steps you should take, and specific instructions for certain accounts such as utilities, phones, government benefits, checking accounts, etc.

If you need help dealing with collectors or if you're being sued because a thief used your identity to incur debts, talk to a debt relief or consumer protection attorney.