What is a Credit Freeze and How Can It Help Secure Your Credit Reports?

Are you who your data says you are? Digital transformation has caused an explosion of data breaches, identity theft, and fraud that puts your credit report at risk even when you’re doing everything right.

Fortunately, regulators have stepped in to give you more control over your financial data than you may realize. In 2018, Congress gave consumers the right to direct the three major U.S. credit bureaus — Equifax, Experian, and TransUnion — to freeze their credit at no charge.

A credit freeze restricts access to your credit report, preventing creditors, lenders, and others from viewing your credit history unless you temporarily or permanently allow access.

Creditors, lenders, and others can’t access your frozen credit reports unless you temporarily or permanently lift the ban. Credit freezes also prevent fraudsters from opening new accounts in your name, which can negatively impact your credibility and credit score.

Now more than ever, a credit freeze can be an essential tool to protect your financial future.

Your credit reports from the three major U.S. credit bureaus essentially tell bankers how much they can trust you.

Congress mandated free credit freezes after the massive Equifax data breach of 2017 exposed the credit information of approximately 147 million Americans.

Credit freezes prevent unauthorized access to your data but allow current activity to affect your score.

More consumers turned to credit freezes after 2023’s MOVEit breach, which affected financial institutions, government agencies, and healthcare providers and attracted widespread press attention.

When used wisely, a credit freeze is like a wall around your credit report. You can still damage your credit score through irresponsible financial behavior, but no one can open a new account in your name.

Prevents Unauthorized Access

Credit freezes block access to your credit report for most financial entities, protecting against identity theft by preventing fraudulent credit applications.

Each of the three credit bureaus collects and analyzes your credit data independently and applies different models, including the popular FICO scoring model, to produce credit scores. As of 2018, they’re all required to freeze report data on demand.

A credit freeze blocks new hard credit inquiries, preventing anyone from opening new lines of credit in your name. 

Only you can flip the switch, usually when you want to take out a loan or open a new credit card.

Placing a Freeze With the Credit Bureaus

I always tell people that knowledge is power, and this is one of those times when a little information can make your life a lot more convenient.

Each credit bureau maintains an independent record of your financial information, and each provides a simple process for freezing and unfreezing your credit. But they’re not all the same.

Instead, you’ve got to get to know each bureau. After all, they’re businesses that earn revenue from producing credit reports and scores, and they’re happy to welcome website visitors.

To freeze your credit, you need to create an account and go through an easy manual procedure on each bureau’s site:

• Equifax
• Experian
• TransUnion

I always say that keeping tabs on your passwords (and changing them regularly) is just common sense, especially when it comes to your financial sites. You want your login information to be there when you need it, and you don’t want to be fumbling around when your money’s at stake.

Lifting or Thawing a Credit Freeze

It’s good to remember how the online world benefits our lives. We’ve come a long way with technology, but we’re nowhere near the point when it can manage itself.

So, you must remember that although you’ve frozen your credit to prevent unauthorized inquiries, there may come a time when you want to open it back up again.

You can thaw your credit freeze temporarily for specific periods or open it up to particular entities — like when it’s time to apply for a mortgage or auto loan or qualify for a lease.

You’ll receive a PIN or password during the process of freezing your credit with each bureau. I can’t stress enough the need to know your PIN or password, just like you have to remember everything else online.

Your credit freeze PIN or password is your key to unlocking access to your credit data at each bureau when needed.

Why in the world would you want to freeze your credit? Some of you may be skeptical that a credit freeze is worth the trouble. Hear me when I say that credit freezes are potentially some of the most effective tools in your identity protection arsenal.

That’s because they don’t let anyone in unless you say so.

Warning: You’ll go through a meticulous identity verification process if you forget your credit freeze PIN or password.

They’re the ultimate roadblock against financial fraudsters using your personally identifiable data to damage your credit score and financial reputation by opening new accounts in your name.

As far as I’m concerned, getting the word out about the power of credit freezes is essential because they put consumers in control without requiring undue attention and management. Just stay aware of the freezes you’ve put in place and how you’re using them to your advantage.

To Protect Against Identity Theft

Criminals commit identity theft when they obtain enough verifiable data about you to assume your identity (or construct a new one based on partial information).

They can use that identity — along with your high credit score — to apply for credit cards and loans.

Then, they somehow forget to repay. Imagine that!

Freezes prevent that by disallowing new credit inquiries. Keep in mind from the data breach info I cited above that many or most of us probably have at least some personally identifiable information out there on the dark web. Every Equifax or MOVEit data breach increases our vulnerability.

Freezing your credit prevents criminals from using your information to open any new accounts or credit cards in your name, damaging your credit score along the way.

Maintain Control of Your Credit Report

A credit freeze is a powerful tool, which is why it’s so important to convey the importance of managing your bookmarks, passwords, and PINs.

Once you put a freeze in place behind a gate that you alone know how to open, it’s no easy task to tunnel underneath or leap over.

Forgetting your PIN or password requires you to contact each credit bureau, verify your identity, recover your PIN or password, and possibly reestablish your freeze if the bureau lifted it sometime during this process.

It’s a hassle, but it signals the extent of your power over your information. It’s your mission — should you choose to accept it. But in a world of uncertainty, freezing your credit is a great place to start when you want to protect your financial security.

Credit Freezes as a Long-Term Security Measure

Putting you in charge means nothing stands between your money and your choice.

Credit freezes remain in place indefinitely until you choose to remove them.

Take it from me: Once you put a freeze in place at each of the three credit bureaus, your relationship with your credit score improves subtly. It’s a good feeling to know you’ve taken a concrete step to put yourself in the driver’s seat.

For me, freezes work much better than ongoing monitoring services or fraud alerts, which may not adequately handle new and emerging threats.

They’re perfect when you’ve got your financial life where it needs to be and want to add some peace of mind that it will stay that way.

You’ve just got to be ready to flip the credit freeze switch back and forth when it suits you.

Free credit freezes at the three major U.S. credit bureaus provide strong identity theft protection for long-term financial security. But you’re shooting yourself in the foot if you can’t manage them properly.

So, here’s your last warning: Don’t misplace your credit freeze info, or it’ll come back and bite you in the keister when you least expect it. None of us want that!

Benefits

The MOVEit data breach in 2023 opened a lot of eyes to the ongoing problem of data security. If observers thought the digital security industry cracked the protection code after 2017’s Equifax breach, they quickly learned otherwise when MOVEit, a data storage site, turned out to be using file transfer technology with a built-in vulnerability.

Credit freezes provide a powerful layer of credit report protection and consumers can make their reports accessible again whenever they want.

There’s no scenario where counting on security stakeholders to stay ahead of the criminals makes sense because there’s too much at stake, money-wise. There are no moving parts in a credit freeze, no need to manage anything, and no costs other than your time and the price of your internet connection.

No matter what happens out there in the online world of endless innovation (for better and for worse), a credit freeze can block access to at least one major avenue for fraud.

Potential Drawbacks of a Credit Freeze

Putting credit freezes in place may not be the right choice for you if your life is in flux. Students, young professionals, and growing families with many reasons to leverage new credit accounts may find the management mechanics cumbersome.

It’s better to rely on other forms of protection, including but not limited to the monitoring services or fraud alerts I mentioned above, if you’re frequently dipping in and out of the lending marketplace. Only you can decide how much thought and action you want to put behind managing credit freezes.

A credit freeze may not be a good option if you frequently engage with credit card applications or the lending marketplace.

Personally? I have a high tolerance for managing my life online, and I’ve gotten pretty good at it over time. Your mileage may vary.

I can switch my freezes with all three bureaus off and on at the drop of a hat. Expect delays if that’s not easy for you or if you put identity verification, a phone call, or anything in writing in the picture.

If you do this right, it’s easy. The bureaus want to communicate with you digitally. Let them.

Today, many of us, including me, take contactless payments and virtual cards almost for granted.

In fact, I don’t know that I’d be able to accommodate cash if I ever came across it. Thankfully, I haven’t dealt with it in ages, and I know I’m not alone.

For me, there’s no world where handling cash brings an advantage. It’s much better to account for everything on my phone.

If you’re like me (and even if you’re not), poke around the three credit bureau websites and explore their options to freeze your credit — if you haven’t already. I’m confident you’ll be glad you did.