In the aftermath of the recent Equifax data breach, which resulted in a data leak impacting 143 million Americans, some data security experts are recommending that consumers "freeze" their credit.
A security freeze will prevent potential lenders from accessing your credit report, stopping a thief from opening an account or getting credit—even if they have your personal information.
Even so, you need to know what's at stake before you decide on a credit freeze. Given the severity and pervasiveness of the Equifax breach, experts say consumers should get their ducks in a row first, to gain maximum leverage from putting their credit on ice.
Here Are the Seven Steps You Need to Take Before Freezing Your Credit:
Take a Deep Breath and Don't Panic
Know What a Credit Freeze Is
By and large, when you freeze your credit report, you are stopping any of your personal data from being reported to lenders and creditors. Thus, in the event that a fraudster would try to use your Social Security number to apply for a credit card, that application would be rejected, as the bank would be unable to verify your credit score.
Understand the Credit Freeze Process
The path to a credit freeze involves informing all three major credit bureaus. "Each bureau will ask you to answer several questions to validate your identity, and you'll get a PIN code that you can use to freeze and unfreeze your credit report, as needed," Clements says. If you forget your PIN, you'll need to contact the bureau to verify your identity, and reset your account access with a new PIN.
Freezes Are Now Free
There is no longer a cost to freeze or unfreeze your credit report thanks to the recently enacted Economic Growth, Regulatory Relief, and Consumer Protection Act. Credit freezes are now free in all states, for both placing the initial credit freeze as well as "thawing" or lifting the credit freeze, either temporarily or permanently.
"Those costs can add up," says Sean Coffey, spokesperson for the California Reinvestment Coalition, who once had to freeze his own credit report. "Two years ago, my wife and I tried to file our taxes and our return bounced back, presumably because somebody had stolen our identity," he says. "So, we froze both of our credit reports, But with three credit agencies and two people, at $10 per action, it wound up costing $60 for our freeze, and another $60 to unfreeze our credit reports. It was a frustrating experience."
Fees and requirements for adding and removing a freeze vary by state, however fees are waived for victims of identity theft with a valid investigative report.
A Freeze Doesn't Protect Everything
In the event your credit card number falls into a fraudster's hands after a data breach, know that a credit freeze won't help. "A credit freeze does not prevent financial loss in that event," says Leslie Tayne, owner of Tayne Law Group in New York City.
Expect Credit Delays with a Freeze
Credit freezes can create delays and problems when credit is needed quickly in the case of applying for a loan, credit card, or even a job hunt, says Tayne. "During a freeze period, most companies will not extend credit until they check one's credit file with one or three major credit bureaus, and that takes time" she explains.
A better, alternative avenue to a credit freeze may be to sign up for a fraud alert, says Tayne. "That's where a credit reporting agency puts a warning on consumers' credit reports, alerting potential lenders to verify the identity of anyone attempting to open an account in a consumer's name," she notes. "That way, a credit reporting firm can make validate the legitimate credit applicant before granting any credit."
Even if you do get a credit freeze, make sure to check your financial statements regularly, says Sage Singleton, a safety and security expert at SafeWise, a home security and safety firm.
"Also, update your passwords if you suspect your data may have been exposed via a breach and ensure they are strong and unique, set up financial alerts, and make sure to speak up if something goes wrong," she advises.
A credit freeze could be a viable option if you're involved in a data breach, especially one the size and scope of the Equifax breach. Just know going in where you stand, and the pros and cons of freezing your credit.
If you want the ability to lock and unlock your Experian credit report on the fly, Experian CreditWorksSM or Experian IdentityWorksSM members can do that through a product benefit called Experian CreditLock.
Editorial Disclaimer: Opinions expressed here are author's alone, not those of any bank, credit card issuer, or other company, and have not been reviewed, approved or otherwise endorsed by any of these entities. All information, including rates and fees, are accurate as of the date of publication.