Last month, the president signed the Economic Growth, Regulatory Relief and Consumer Protection Act. Tucked inside this legislation mostly aimed at loosening banking restrictions was an important win for consumers.
This new law states that people throughout the country soon can put a credit freeze on file with the three credit reporting bureaus for absolutely free. Just as important, you will also be able to thaw your credit freeze temporarily or permanently, also for free.
A credit freeze, also known as a security freeze, puts a lock on new credit applications and prevents fraudsters from taking out credit in your name. It is a much more effective means of locking down your credit than fraud alerts and credit monitoring services. While there are many companies that will try to sell you identify theft protection services, nothing is more effective than a true credit freeze set up directly with Equifax, Experian and TransUnion.
While the new law is expected to take effect in September, Colorado residents have access to free credit freezes right now. So if you haven’t done so already, you should freeze your credit before the new federal law takes effect. You can check to see the laws in other states at Consumer Union web site ( consumersunion.org).
Will a credit freeze hurt my credit score or prevent my current creditors from accessing my credit?
Setting up a credit freeze will not damage your credit. The companies that already have a credit relationship with you such as credit cards, mortgage lenders, mobile phone carriers and insurance companies will still be able to access your credit.
Will a credit freeze affect the process of applying for a job or for a new insurance policy?
If you have a credit freeze in place, you most likely will need to thaw your credit freeze to apply for jobs that require background or credit checks. If you’re looking at shopping your auto or home insurance, you’ll need to thaw your credit as in many cases insurers view your credit score as more important than your driving record.
Will a credit freeze prevent the filing of false tax returns or help repair my credit if its stolen?
Unfortunately it appears that this law will not improve the safeguards in place around filing tax returns. Millions have had fraudulent returns filed in their names, costing taxpayers billions and delaying legitimate refunds.
Also, this law does not provide assistance with the often backbreaking work of credit repair, which are the steps required to correspond with creditors when your credit has been used fraudulently. As a result, credit repair services offered through your homeowners insurance policy or by other companies can be a valuable service to ease the administrative burden of repairing your credit.
How quickly can I thaw my credit and must it be done permanently?
The law requires that the credit bureaus can take up to one hour to permanently or temporarily remove a credit freeze. In practice, most of us should find the process will take minutes as long as you have access to the security PIN given to you when you initially set up the freeze. A thaw can be permanent or for a specified period of time, which is what I would recommend.
Is it any easier to freeze and thaw your credit?
Not really. You still need to contact Experian, Equifax and TransUnion individually to freeze and thaw your credit. Each of the credit bureaus has a different PIN they set up that is needed to thaw your credit quickly. Don’t misplace it or be ready to wait a week or more to thaw your credit as they verify your identity.
Does everyone in my family require a credit freeze?
You and your spouse must individually set up credit freezes will all three bureaus. Consider putting a credit freeze in place for your children as well, as they are particularly vulnerable to fraudulent credit applications. This is becoming increasingly common and can impede them from applying for student loans and other forms of credit.
Finally before you put a credit freeze in place, consider a free credit monitoring service such as Credit Karma that will allow to you to stay up on your credit score and any new credit applications. You’ll need to set up credit monitoring before you freeze your credit.