Freezing your credit is now free (and probably makes more sense than ever)
In April I wrote an article about the steps Sensible Financial takes to protect our clients’ information along with actions you can take to protect yourself, such as using strong passwords and enabling multifactor authentication where possible. A newly-passed law now makes it easier to protect your credit information.
Earlier this year, the President signed into law the Economic Growth, Regulatory Relief and Consumer Protection Act. Most public comments about the law focused on its loosening of restrictions previously placed on banks following the Great Recession. A less-well-known section of the legislation that went into effect on September 21st makes it free for consumers to freeze and subsequently thaw their credit files at the three major credit bureaus. Previously it had cost between $3 and $10 depending on where you live.
- A creditfreeze, also known as a security freeze, prevents someone, including you (!), from opening a new line of credit under your name.
- A credit thawundoes a credit freeze, allowing a person to open a new line of credit, perhaps for a car loan or a cell phone account.
The law is important since many credit experts recommend freezing your credit to minimize the risk of credit fraud and identity theft. The Equifax breach exposed the personal data of roughly 150 million American citizens, or roughly one in two people. This means there is a high likelihood that some of your most sensitive information, such as your Social Security number, date of birth and/or driver’s license, has been compromised.
Equifax has an online website, www.equifaxsecurity2017.com, where you can check to see if your data was compromised. You will need to provide your last name and the last six digits of your social security number. If you are uncomfortable with providing this information over the internet, you can call Equifax Consumer Care at 888-548-7878 seven days a week between 8 AM and midnight EST (as of this writing the automated assistant does not provide a specific option to speak with a representative about whether you were affected by the breach, but I was able to reach someone by pressing the number three).
Whether or not you were affected by the Equifax breach, there have been several high-profile data breaches over the past few years, including Yahoo (3 billion affected users), Target (110 million), and Facebook (50 million), to name a few. In all these instances, some sensitive personal data was compromised. And since there may be no way of knowing with certainty whether you were affected (or whether you will be in the future), it is likely in your best interest to freeze your credit. (A credit lock is a more convenient but less secure alternative to a credit freeze; although not covered here, you can read more about the differences between the two at Consumer Reports here).
How to freeze your credit
For a credit freeze to be effective, you must freeze your credit at all three bureaus. You can do this online (which requires you to submit your full Social Security number) or over the phone. Before you freeze your credit, familiarize yourself with the following steps (answering too many questions incorrectly can lead to delays). Also, make sure you have a secure method of storing your credit freeze information (you will need it to thaw your credit in the future).
Step 1. Have your Social Security number, date of birth, past addresses and information about recent loans, e.g. mortgage, car loan, readily available.
Step 2. On a home computer (not a public Wi-Fi) or over the phone, contact each bureau using the information below. After verifying your information, select the option to freeze your credit.
Equifax: www.freeze.equifax.com; 800-685-1111
Experian: www.experian.com/freeze/center.html; 888-397-3742
TransUnion: www.transunion.com/securityfreeze; 888-909-8872
Step 3. Record your Personal Identification Number (PIN) and username and password (I needed this for Transunion but not for Equifax or Experian) and store in a safe location for future reference. You will need this information to thaw your credit in the future.
Things to consider
There are several considerations to take into account before freezing your credit. I’ve listed what I think are some of the most important factors below.
- If you have not yet opened a My Social Securityaccount, do so at https://www.ssa.gov/myaccount/ before freezing your credit. After you freeze your credit you may be prevented from opening an account as the Social Security Administration uses information in your credit profile to verify your identity.
- Credit freezes are made on an individual basis. If you are married, each spouse must freeze their own credit.
- If you have children, consider freezing their credit. The law new requires credit bureaus to create and freeze files for children under the age of 16 at their parents’ request. (Children 16 and older can request a freeze themselves). This is particularly important as identity theft among young people can go unnoticed for years, perhaps until they apply for their first credit card or apartment and get rejected.
- A credit freeze protects against opening new lines of credit. If a thief already has your bank information or credit card number, freezing your credit will not prevent unlawful transactions. You still should regularly check your bank and credit card statements for irregularities.
- A credit freeze may be inconvenient if you frequently open new accounts (this may include opening accounts at an existing bank).
- There is a fourth, lesser-known bureau called Innovis. Although they collect less data than the big three, some experts recommend freezing your credit there as well. You can do this (easily) online, by phone, through the mail, or if you happen to be in Pittsburgh, PA in person. Instructions here.
The new law makes the credit freeze decision easier. Even if you regularly open new accounts or will be applying for credit in the near-future, freezing and subsequently thawing your credit is now free. And although it’s no guarantee that you will never be the victim of fraud, it’s one of the best things you can do to protect yourself.