In the internet age, fraudulent credit transactions are becoming increasingly common. If fraudsters gain access to your personal information, they might try to obtain credit pretending to be you. This is known as identity fraud, which is a result of identity theft. While you must take every step possible to prevent frauds from gaining access to your sensitive personal information, a new method being recommended by several credit and finance experts and credit report agencies is – freezing your credit.
Credit Freeze – What It Means To Freeze Your Credit Report
Several states in USA now allow consumers to place a credit freeze on their credit report. In simple terms, this means an individual reserves the right of access to their credit report,only temporaril lifting the credit freeze when required. By placing a freeze on your credit report, you are preventing an identity thief from opening credit accounts in your name. If potential creditors, future employers or anyone else needs access to your credit history, you will have to specifically grant them this access. Current creditors however will continue to have access to your report, irrespective of you freezing your credit. Be rest assured, freezing credit does not have any effect on your credit score at all.
How To Credit Freeze – Following Security Freeze Laws
Every individual state in USA has its own credit freezing laws and consumer must follow state laws to know exactly how to freeze credit. Some states provide credit report freeze protection to all residents; while others only allow identity theft victims to place a security freeze. In most states, identity theft victims are not required to pay any fees when freezing their credit history, however all other consumers may be required to pay a fee, which is usually about $10. This fee is payable to each of three credit bureaus – Experian, Equifax and TransUnion. Pay the fee to each credit reporting agency individually and place a remember freezing credit with all three is essential or your credit history might still be accessible by others.
Freezing Credit Report Vs Credit Fraud Alert
Freezing your credit report and placing a credit fraud alert on your credit file are both ways to minimize further damage to your credit history. If you have had your identity stolen and have placed a fraud alert on your credit file, potential creditors are required to be doubly careful as there may be an attempt to obtain fraudulent credit. However, often this means a creditor simply gets in touch with you to verify your identity or employs “reasonable policies and procedures” to do so. This however is not always a foolproof method as the fraudster may easily pretend to be you and have access to all the identifying information about you.
Freezing credit reports on the other hand means third parties, including potential creditors cannot access your credit history. Therefore, a fraudster cannot apply for new credit and therefore providing you greater protection against a credit scam.
Freeze Credit And Stop All Credit Fraud?
Unfortunately, credit freezing is not a magical solution to all your credit fraud problems. When you freeze credit, you are taking a step towards preventing future credit scams and fraudulent credit applications. However, freezing credit cannot protect you from an ID thief using your current credit accounts, unless you place a block on them. Also, several credit accounts, especially for household services like electricity, telephone or internet, can be opened without a comprehensive credit check. In such a case, even if you freeze your credit report, you cannot prevent the ID thief from pretending to be you.
With the growing occurrence of ID theft, freezing credit is definitely an option worth considering. However, do not rely on a credit freeze to protect you alone. Make sure you take other measures to prevent and protect yourself from credit fraud and scam.
