The Buzz Around A Credit Freeze

New Regulations Help Consumers Fight ID Theft. Here’s what you need to know to protect yourself.

A new federal law that took effect Sept. 21 mandates easier (and less expensive) protections for consumers hoping to shield their credit information against fraud and Identity Theft.

Under the Economic Growth, Regulatory Relief and Consumer Protection Act, consumers now have a guaranteed right to freeze or un-freeze their credit with no fees attached. Previously, consumers could contact the three major credit bureaus (Equifax, Experian and TransUnion) and institute a credit freeze for $10 at each bureau, preventing unauthorized access to a person’s credit and credit information. When you wanted to unfreeze your credit, an additional $10 fee was charged per bureau.

As a result of the new law, all requests for a credit freeze are completely free of charge and there are no fees for un-freezing credit at any time. In addition, a credit freeze can now be instituted for up to one year rather than the previous 90 days.

This huge victory for consumers comes just one year after Experian acknowledged a monumental data breach that put the credit information of nearly 150 million people at risk. Unfortunately, many consumers aren’t exactly certain what a credit freeze accomplishes, and there are a lot of misperceptions about how a credit freeze works.

What is a credit freeze?

A credit freeze allows consumers to maintain strict control over who has access to their credit and credit information. Once you institute a credit freeze, criminals are prevented from opening a credit card in your name, applying for a loan in your name or otherwise fraudulently accessing your credit. Insurers and employers are exempted under a credit freeze, and still have access to your information. In addition, your credit report can still be released to existing creditors or to debt collectors acting on their behalf.

However, under a credit freeze you are still able to use your existing credit cards or access any existing credit products you may already possess (like a home equity loan). You can unfreeze your credit in the event you decide to open a new credit card, apply for a mortgage or otherwise access your credit, and it should be available to you within an hour of lifting the freeze.

The new law also allows parents to initiate a credit freeze for children under the age of 16, freezing the credit file until the child is old enough to use credit. Also, if you have guardianship, power of attorney or conservatorship over an adult, the new law allows you to create a credit freeze on behalf of this person.

The key thing to remember is that a credit freeze provides protection from unauthorized access to credit but does not prevent you from accessing existing available credit.

Why institute a credit freeze?

Since there are now no financial fees or penalties for initiating a credit freeze, there’s really no good reason not to do so, according to credit experts. The main exception is when you know you will soon be applying for a new mortgage, opening a credit account or otherwise accessing your credit. But most financial advisors agree that initiating a credit freeze substantially limits potential abuse of your credit report and is in a consumer’s best interest even if their information hasn’t been compromised by any type of data breach.

What about other preventive measures like fraud alerts?

A fraud alert attaches a “red flag” to your credit, requiring lenders to verify your identity before issuing a loan or credit card. That typically means receiving a call to check if you’re at a particular store or bank attempting to take out new credit. There is no fee to institute a fraud alert and under the new law they last for one year (they previously lasted for 90 days). Victims of Identity Theft are entitled to an extended fraud alert, which lasts for seven years. To create a fraud alert you need to contact one of the three major credit bureaus, which are required to notify the other two of your decision.

What’s the next step?

If you think a credit freeze or fraud alert may be the right thing for you, the recently enacted law makes it even easier to do so. As part of the law, the three major credit bureaus are required to create an online option making it quick and easy to initiate your credit freeze. You will need to provide your personal data (name, address, date of birth, Social Security number, etc.) in order to create a credit freeze. Once you do so, each credit reporting company will provide you with a confirmation letter that includes a unique Personal Identification Number (PIN). You will want to keep this information private and readily available since you’ll need it to when you choose to lift the freeze.

In accordance with the new law, here are the links to all credit bureaus where you can institute your credit freeze: