Whenever there’s a data breach in the news—and ugh, it seems like lately there’s always a breach—people’s responses seem to fall into one of two camps: Some know exactly what to do to neutralize any potential risk (or have a financial advisor on speed dial), and the rest of us shrug, maybe change a password or two and then go about our day.
But it turns out there’s a very specific, concrete way to protect yourself, and you don’t have to be a finance genius to understand it: a credit freeze. We spoke Dana Marineau, VP and financial advocate at Credit Karma (a personal finance site that offers, among other things, free credit reports), to find out exactly what that entails—and how to figure out whether it’s something you should consider.
What is a credit freeze?
A credit freeze (sometimes also called a security freeze) is a free tool anyone with a credit record can use. When you freeze your credit, you’re restricting access to your credit report. And since lenders (e.g., credit card companies) generally need to see your credit report before letting you—or someone pretending to be you—open an account, a credit freeze has the ability to stop fraudulent activity in its tracks. “Freezing your credit is an effective, cost-free way to make it harder for thieves to open up credit cards or other financial accounts in your name,” Marineau says. “It also can reduce your chances of becoming an identity theft victim.”
How do I set one up?
You’ll need to contact each of the three major consumer credit bureaus (Equifax, Experian and TransUnion) to request a freeze. Be prepared to provide your name, address, birth date, Social Security number and answer a few other identifying questions. You’ll then get a PIN you can later use to unfreeze and refreeze your credit report (more on this below).
Note that it’s important you contact all three bureaus: Your information is technically accessible via three access points, so if you only enable a freeze at one, you won’t really be getting the full protection a credit freeze offers.
What are the benefits?
The biggest advantage is that a credit freeze helps reduce your risk of identity theft, since it prevents new accounts from being opened in your name. Credit freezes are also free by federal law, as of September 2018. Setting up a credit freeze doesn’t affect your credit score, and if you do need to have your credit checked for any reason, the freeze can be temporarily lifted.
Are there any downsides to freezing my credit?
If you do need to temporarily lift the freeze, you’ll need to contact each credit bureau and make a request with your PIN. Reasons you might want to lift it include applying for a credit card or mortgage, renting a home or a car, signing up for a cell-phone plan or, in some cases, starting a new job, since many employers require credit checks. Once you put in the request to unfreeze, it can take a few days to “thaw” (yes, that’s the term), which can delay any of the above processes. (Though, per the 2018 law, unfreezing is also free.)
Another thing worth mentioning: While a credit freeze can stop someone from opening new accounts, it can’t protect you against fraud on existing accounts. “A freeze lets you restrict access to your credit report, but it won’t protect you in situations where criminals already have access to your accounts, like if your bank login credentials were previously stolen via hacking,” says Marineau.
In other words, it doesn’t make you invulnerable, financially speaking, and it’s definitely not a blanket excuse to stop monitoring activity on your accounts.
When should I consider a credit freeze?
“Any time you’re worried about your identity being exposed—whether your wallet was stolen, or there was a recent data breach—you may want to consider a credit freeze,” says Marineau. “But if you know something is coming in the near future that requires a credit check—like applying for a new credit card or applying for a new job that requires a credit check—you may want to think twice, given it can be time-consuming to lift the freeze.”
There’s no one-size-fits-all suggestion as to whether you should or shouldn’t freeze your credit file—everyone’s individual situation is unique—but given the recent frequency of data breaches, many experts suggest it as a preventative measure, particularly if there’s a chance any sensitive information has been exposed. (If you want advice specifically tailored to you, you’ll have to get in touch with a financial advisor.)
What’s the difference between a credit freeze and a credit lock?
You may have seen the term “credit lock” thrown around, too. A credit file lock is somewhat similar to a freeze—they both block access to your credit report—but they’re not exactly the same. “There’s one major difference between credit file locks and credit file freezes: Unlike locks, freezes do not require you to maintain a subscription at a credit bureau,” Marineau explains. Lock services are offered by the major credit bureaus, sometimes bundled with other products and sometimes with a fee, whereas freezes are always free and mandated by law. However, locks can be unlocked and relocked immediately at any time—on the bureau’s website or app—which may be preferable if you know you’ll need to lift it often (if you’re house-hunting, say).
Whether you go with a lock or a freeze, Marineau reiterates that you’ll still need to contact each bureau individually. “Unfortunately, there’s no central hub where you can lock or freeze all your reports at once. So technically, you’ll need to lock or freeze your credit reports at all three bureaus to have the best chance at preventing criminals from opening new accounts.”
Is there anything else can I do to protect my credit?
Freezing (or locking) your credit can be a major safeguard against fraud, but there are other ways to keep an eye out for suspicious activity. Marineau recommends using a credit monitoring tool, which alerts you of any changes to your credit report, along with an identity monitoring tool (such as the one Credit Karma offers), which notifies you if your information was exposed in a breach.
If for whatever reason you’re hesitant to freeze your credit, another option Marineau recommends is placing a fraud alert on your credit reports. “A fraud alert notifies potential creditors and lenders that you’ve been (or suspect you’ve been) a victim of identity theft or fraud,” Marineau explains. “It’s free to place a fraud alert, and you can remove it anytime. It’s one step you can take to help protect yourself from ID theft when you think—or know—your identity has been compromised.”
However, Marineau cautions that even when you have a fraud alert in place, there’s no guarantee it will stop identity theft. But it essentially acts a red flag for potential lenders, warning them to take additional steps to verify your identity before opening a new account. To place a fraud alert, just contact any of the three credit bureaus. Notably, you only have to contact one (unlike with a credit freeze)—they’re required to pass along the fraud alert request to the other two bureaus.
Ultimately, it’s up to you to decide whether a credit freeze, a credit lock or some other strategy is the best choice for you. But it’s nice to know that when the next data breach inevitably comes down the pike, you do have a few very good options for keeping your identity—and your money—protected.