What is a Credit Freeze and How Can It Help Me?

Nearly all victims do not realize they have become a victim of credit fraud until they try to obtain a credit card or loan and are denied due to a poor credit repayment history. One of the tools that can prevent such a scenario is placing a credit freeze on your credit files.

What is It?

A credit freeze is a mechanism to prevent identity fraud. An individual contacts the credit bureaus and requests her credit file not be visible to a potential lender until she gives permission. When a company tries to pull a credit history, the file shows up as frozen and no personal information is divulged. This reduces the risk of an identity thief being granted a credit card or loan

Credit Freeze vs. Fraud Alert

There are two basic ways to protect your file against identity theft: credit freeze and fraud alert. While a freeze prevents your file from being seen until you grant access, a fraud alert allows the potential creditor to view your entire file. However, with the fraud alert, your file actually contains a warning that states you have been a victim of identity fraud. The alert usually contains two contact numbers where the potential creditor can reach you to verify the credit request. The creditor will usually ask you information about your credit report that you should know such as your mortgage payment and who your auto loan is with. The creditor should not ask for your social security number or other account number information. Most fraud alerts will last 90 days. An extended fraud alert can last up to seven years if you provide the credit agencies with a police report proving you have been a victim of fraud.

Placing a Credit Freeze

To place a freeze on your credit report, you need to contact each of the three credit agencies; Equifax, Experian and Trans Union. You will need to provide each agency with identification to prove you are not an identity thief. The credit agencies, in turn, will provide you with a personal identification number. This number can be used to temporarily remove the freeze on your credit report. When you request the freeze be released you must include the name of the institution that will be reviewing your credit report. Usually the freeze release is only for 24 hours.

Problems Facing Credit Freeze

The major disadvantage in placing a freeze on your credit account is loan or credit delay. If you are in a hurry to obtain a loan or credit card, keep in mind it can take some time for you to contact the credit agencies and have the freeze removed. Expect a delay of at least 48 hours and plan accordingly.

It is up to you to protect your personal credit file. Of all the victims who were initially unaware they had been a victim of identity theft, only a small percentage of them learned the truth when a business contacted them asking if they were seeking credit. If you put a freeze on your credit, it forces the potential creditor to contact you to remove the freeze so they can check your credit history.