CLEVELAND, Ohio — After Equifax last year said that thieves stole detailed, personal information about 145.5 million people nationwide, millions of consumers scrambled to freeze their credit files to prevent people from opening new accounts in their name.
The process of freezing your file often isn’t easy. It usually costs money. So, you might wonder: Why do you have to take action to freeze your files? Why aren’t our files frozen automatically, by default, and then we can allow the files to be opened if we’re applying for credit or insurance?
The Equifax breach was the biggest and worst cyber theft we’ve seen so far, affecting half of the U.S. adult population.
Credit files with the major credit bureaus hold more information about you in one place than just about anything short of an FBI file.
It’s got every version of your name, every address you’ve ever lived at, current and past employers, all of your past loans and debts, current account balances and any history of court filings against you. Oh, and your Social Security number, date of birth and driver’s license number too.
And it’s open for all-too-many people to access for the asking.
If you don’t want banks, insurers and goodness-knows-who-else to get ahold of your file without your expressed permission, you have to go to the trouble of freezing your file — shutting off access. And in most states, freezing your file costs money — from $3 to $10 or more. (It’s $5 in Ohio.)
To prevent thieves from using that stolen information to open new accounts in your name, freezing credit files is encouraged. Banks won’t open accounts for someone without being able to access her credit history. But freezing that file can be a hassle for some people.
“The best thing for consumers would be if credit files were frozen by default,” said Mike Litt, consumer campaign director of the non-profit U.S. Public Interest Research Group in Washington, D.C.
“We didn’t hire Equifax and Experian and TransUnion to collect our information, let alone to lose it,” Litt said. But consumers could have at least some amount of control if credit files were automatically frozen and unable to be accessed to open new loans or credit accounts.
The problem is that the system doesn’t respect that credit files are built with personal information, said Chi Chi Wu, staff attorney at the National Consumer Law Center in Boston. “We are the commodity, not the customer,” she said.
Credit files at the major bureaus focus on consumers’ payment histories, account balances, history of opening new credit accounts and more. The information is supplied largely by banks, credit card companies, court records and databases. But the information is about us. So there should be more done to help protect it, Wu said.
Greg Young, spokesman for Experian, said the company is simply complying with current laws. “State security freeze laws require us to place a security freeze at the request of a consumer,” he said. “We can’t freeze consumers’ information without their permission.”
The other two credit bureaus, Equifax and TransUnion, didn’t respond to questions about why credit files aren’t frozen by default.
In the past, the bureaus have said it would be logistically difficult to have everyone’s files frozen and then jump through hoops to unfreeze them when applying for a mortgage or car loan or credit card or insurance or employment background check.
The way it works now, if you freeze any of your credit files, you need a PIN to thaw it for a day or three or permanently. The PIN is either provided to you after you freeze your file or, in the case of TransUnion, is a number you create yourself. Without the PIN, you can’t thaw your file. With the PIN, you can thaw your file by phone in mere moments.
So the question becomes: If your file is frozen by default, how do you get the PIN to thaw it? Is it sent to the mailing address you have on file? That takes time.
Litt offers an easy solution. Currently, you can get your credit file instantly online if you provide the correct answers to several “out-of-wallet” questions. Yes, you have to provide your name and address and Social Security number and date of birth.
But to get your credit file instantly, you’re also asked things that aren’t easily knowable by anyone except you or a member of your household. Questions are typically ones like this: How much is your mortgage payment, within $50. How much is your car payment, within $50. Which one of these four cars did you once own: a Ford Focus, a Chevy Malibu, a Dodge Stratus or a Honda Civic. You once lived on one of the following four streets. Which one?
What if you had to provide the same sorts of information to thaw your credit file instantly, Litt asks.
A solution like that might work, Wu said, although she acknowledged that the security questions sometimes trip people up. If you really wanted to thaw your file for a loan application or job offer, it would stink if you couldn’t unfreeze it.
Another option, she said, is a certified user such as a bank or insurer could thaw your file with the credit bureau on a case-by-case basis after verifying your identity with a driver’s license or passport or other government ID.
There has been increasing buzz that the horrific Equifax breach could prompt change. Maybe there could be a national push to freeze everyone’s credit files by default.
While Experian says it has to comply with state laws, the bureaus also had to comply once upon a time with laws about giving people a copy of their own credit report at a cost. Federal law changed in 2003 to give consumers the right to request their credit reports free once a year from each of the bureaus.
Most likely, Litt and Wu say, any changes in laws surrounding credit freezes will come in individual state legislatures. In one sign of progress, they say, the number of states that have free freezes is up to eight plus Washington, D.C. (Most states do offer free freezes to senior citizens and victims of identity theft.)
“The best hope for consumer-friendly legislation,” Litt said, “is at the state level.”
Equifax is offering free credit file freezes through Wednesday. It’s recommended that you freeze your files by phone; it’s the easiest. Don’t get talked into a free credit lock, which is not the same thing as a credit freeze. The bureaus have been pushing locks, largely because they have to be accountable to regulators for freezes, but not for locks.
To freeze your credit files by phone: