Americans worried about identity theft can freeze their credit reports for free starting Sept. 21, when a new law passed in May of this year goes into effect. The three major credit bureaus—Experian, Equifax and TransUnion—will be legally obligated to freeze (and unfreeze) the reports containing sensitive personal information on consumers without charging a fee.
Why credit freezes are important
Freezing your credit prevents fraudsters who have already obtained stolen information on you from opening new lines of credit in your name without your knowledge. It also helps you avoid spending time and money contesting debt racked up by a criminal.
Prior to this new legislation, each of the three credit bureaus could charge a small fee, ranging from a few dollars to as much as $10, to freeze your credit reports, which prevents them from sharing it with any lenders who request it. The bureaus could also charge a fee to unfreeze your credit report, which is necessary in order for a mortgage lender (for example) to take a look at your credit report and be able to assess whether to grant you a loan.
The exact amount you have to pay under the current law depends on your state of residence, with the following states already demanding the bureaus offer free credit report freezing and unfreezing:
- District of Columbia
- North Carolina
- South Carolina
- South Dakota
The rise in data breaches
Last September, Equifax announced the personal financial information of 143 million people had been exposed in one of the largest data breaches in history. The massive cyber crime provided a sobering reminder of how Americans are more vulnerable than ever to identity theft. A recent study by Javelin Strategy & Research found the number of Americans who have fallen victim to identity theft or fraud continues to rise in recent years. "2017 was a runaway year for fraudsters, and with the amount of valid information they have on consumers, their attacks are just getting more complex,” Al Pascual, research director and head of fraud & security at Javelin Strategy & Research, said in a statement released with the report. "Fraudsters are growing more sophisticated in response to industry’s efforts to implement better security."
Given the increasing threat of identity theft, most experts recommended freezing your credit report as a prudent decision with the only drawback being the process of doing so. "Given the almost non-stop data breach announcements, freezing all of your credit reports is a smart idea," said credit expert John Ulzheimer, formerly of Equifax and FICO. "Freezing is a 'set it and forget it' option that will never stop operating even if you're disconnected from your own credit reports for a long period of time."
How to freeze your credit reports
To effectively freeze your credit reports, you need to do so with all three credit bureaus. Having your data on lockdown with Equifax and TransUnion does little good if Experian continues to hand out your credit report and unwittingly helps facilitate a fraudulent line of credit taken out in your name.
Each of the major credit bureaus maintains a dedicated website to helping you freeze your credit, listed below:
After completing the process, the freeze should take effect within three days. Each credit bureau will provide you with a PIN that allows you to temporarily (or permanently) unfreeze your credit report with them. Don’t lose this PIN unless one of your hobbies is spending hours on the phone navigating through Byzantine bureaucracy. "In most cases, if you request a lift online or over the phone, your report can be unfrozen within minutes," said Mike Litt, consumer campaigns director of the consumer advocacy organization Public Interest Research Group. "It can take longer if you don’t have your PIN, so make sure to keep it in a safe, memorable place where it can be quickly retrieved when needed."
While unfreezing your credit report is usually a painless process, you have to do so each time you make a financial decision that requires a credit check, such as signing a lease on an apartment or even switching to a new cell phone service. The credit bureaus also offer "credit locks," which claim to offer the same security as a credit freeze but with a more convenient method of granting potential lenders access when they need it. "The lock services tend to be more user friendly," said Ulzheimer. "But if the locks are not free then they're not worth the added convenience and the freeze is the better option." Litt also cautions that the terms of a credit lock can differ from that of a credit freeze. "If you sign up for free credit locks with Equifax and TransUnion, they can use your information for marketing purposes and share it with other financial companies that want to sell you something," Litt said. "Your rights as a consumer are on firmer ground with credit freezes."