Credit Cards

Credit Lock vs. Credit Freeze: How These Security Options Stack Up

Equifax next year plans to debut a free credit lock, a feature already available from the credit bureaus typically for a fee. Find out how a credit lock stacks up against a credit freeze.

In a mea culpa for his company’s huge data breach, the Equifax interim CEO has promised a new service, launching next January, that allows consumers to lock and unlock their Equifax credit report for free, for life. While the details of the offering remain unclear--Equifax has not responded to multiple inquiries from ValuePenguin--it’s touted as an alternative to a credit report security freeze.

The feature, though, is not new. All three bureaus already offer one. Like a freeze, a lock prevents new lenders from opening a loan or credit card in your name by restricting access to your credit report. Both a lock and freeze must be enacted for each bureau separately.

But there are key differences consumers should be aware of, including cost, legal issues and convenience. Should you get a lock over a freeze? Here are four considerations:

Convenience: Advantage Lock

A credit lock is supposedly superior to a credit freeze in that it’s easier to undo the lock, and then lock it again. Experian says you can unlock “instantly,” while TransUnion says you can enact a lock or unlock “with a single swipe or click.” Consumers simply have to sign into their online account to lock or unlock. In some cases, you can do it by mobile app and your report immediately becomes available.

To unfreeze a credit score, the process is more laborious and less rapid. You must provide the personal identification number (PIN) assigned to you after you initially froze your credit report. You also will be asked to provide certain identifying information to complete the process. While Experian recommends that you unfreeze three days in advance, a TransUnion spokesman says an unfreeze by phone or online is implemented within 15 minutes.

The experience of credit expert John Ulzheimer suggests that unfreezing can be fast and easy, or nearly so, as unlocking credit. Ulzheimer said he recently unfroze his credit report to apply for a bank card and it took only moments. He applied in person at a branch, found out which credit report the bank would pull, and took the few minutes to unfreeze that report via his smartphone. His verdict? “Not a hassle at all.”

Upshot: Credit locks promise instantaneous locking and unlocking, which may appeal to credit card churners or consumers who often sign up for new store cards at the register. Otherwise, most people should be able to plan in advance for any credit applications.

Fees: Advantage Freeze

Currently, only TransUnion offers a free credit lock through its TrueIdentity service, which only locks its reports. Experian provides a lock function with its IdentityWorks Premium service, which it sells for $19.99 a month, or $239.88 a year. Equifax recently discontinued its monthly paid ID protection services that included a credit lock. The only way to access an Equifax lock (before the free one is unveiled next year) is through TransUnion’s more robust credit-monitoring service that charges $19.95 a month, or $239.40 a year.

That means you need to spend $479.28 a year for the ability to lock and unlock at all three credit bureaus.

That’s a lot of dough. But these services also come with extras such as three-bureau credit monitoring, Social Security number monitoring, ID theft insurance and alerts that you may want and that credit freezes lack.

Credit freezes come with their own costs, too. Except for a handful of states—Indiana, Maine, North Carolina and South Carolina—there is a fee up to $11 to freeze and temporarily unfreeze each credit report. “You have to multiply that by three, because you must do at all major bureaus,” says Ruth Susswein, deputy director of national priorities at Consumer Action. (Currently, Equifax has waived credit freeze and unfreeze fees for the rest of the year.)

Upshot: Even if you had to pay all three freeze fees, it still would be cheaper to freeze and then unfreeze all your reports once a month for 12 months in Iowa—the costliest state for freezes—than to lock your reports using the paid services from TransUnion and Experian for a year.

Legal: Advantage Freeze

Credit freezes, also known as security freezes, are mandated and governed by state laws. Credit locks, by contrast, are dictated by a contract between you and the credit bureau, says Chi Chi Wu, a staff attorney at the National Consumer Law Center.

“A violation of that state law might be privately enforceable (such as) the consumer can sue in court over the legal violation,” Wu wrote ValuePenguin in an email. “I am not sure what the legal status of the ‘lock’ is.” There is also the issue of forced arbitration. The current credit locks have terms and conditions that require disputes to be resolved via arbitration or in small-claims court, and that ban the ability of “lockers” to join a class-action lawsuit. (Equifax has not responded to our inquiry about whether its free credit lock next year will come with an arbitration clause.) By contrast, a security freeze on your credit report doesn’t bind you to an arbitration clause, meaning you can sue the bureau in the event of, say, a huge data hack.

Upshot: It’s clear: You don’t sign away any legal rights with a credit freeze. Your legal recourse is limited with credit locks.

Protection: Tossup

Equifax ex-CEO Richard Smith said in Congressional testimony that a lock provides the same level of protection as a freeze. A TransUnion spokesman said locking and freezing are “equally as effective in preventing a credit report from being used to open a new credit account in a consumer’s name.”

An Experian spokeswoman said in an email that locks and freezes offer a “similar” level of protection, but there are differences due to state laws. For instance, a potential employer or insurer can’t see a frozen credit report because of state law, but they can access a locked one.

As mentioned earlier, credit locks often come with additional identity theft protection services. But a study earlier this year by the GAO couldn’t determine if these services effectively deter ID theft. The service providers also didn’t track that information, either.

Consumer advocates remain wary of the credit lock in lieu of a freeze. “The most important thing we don’t know right now is if a lock protects as well as a credit freeze. As an organization, we are still recommending a freeze.” says Consumer Action’s Susswein. “We feel more secure with it. We think it’s worth it.”

Upshot: Despite skepticism about locks from some consumer advocates, both freezes and locks prevent new lenders from accessing your credit report, a necessary step in order for a fraudster to get new credit in your name.

ValuePenguin’s recommendation: There’s no compelling reason to pay for a credit lock over a credit freeze unless you need the flexibility of opening new credit often and instantaneously. After Equifax reveals its new free credit lock next year, adding to TransUnion’s existing free lock, Experian may end up following suit. In that case, there may be reason to reconsider a lock. For now, stick with a freeze.

Janna Herron

Janna is a former Senior Writer at ValuePenguin covering banking, credit cards and credit scores. She has spent more than a decade writing and reporting on personal finance, real estate and business, and has received three journalism awards for her work.

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