What Does a “Credit Freeze” Do?

In 2017, a security breach through Equifax leaked personal data on 143 million Americans. With their names, addresses, and Social Security numbers now potentially in the hands of hackers, many of those individuals decided to utilize a credit freeze to protect their identities. You might even be considering this move yourself, if your information was breached (or is compromised in the future).

But, what exactly happens when you freeze your credit? Essentially this means that the three major credit reporting bureaus can no longer provide your credit history when requested by new creditors. So, if someone applies for a credit card using your name and Social Security number, they will receive a denial because the card company cannot assess “their” (your) credit worthiness. In this way, your credit report is protected, and no one should be able to obtain a card or loan in your name.

You must call each credit bureau individually, request the freeze, and pay a fee in order to obtain this protection. The freeze will last indefinitely, until you call again to request its removal (unless you live in one of the states that limit credit freezes to seven years).

While your credit is frozen, you will also be unable to obtain new credit. This could be a problem if you want to purchase a new car or home, or obtain a new credit card. Your insurance company might also run into problems when it’s time to renew policies. An unavailable credit report might raise a red flag, resulting in higher premiums. Sometimes, depending upon the company, you can work this out by explaining the issue.

The freeze might also impact your ability to sign up for a new utility service, if you move or want to switch providers. Of course, you could allow another household member to get utilities in their name.

When you’re ready to end the freeze, or “thaw” your credit, you just need to call all three credit bureaus again. Yes, another fee will apply, but your credit score won’t be affected.

If you’re concerned about your identity, other options are to change all passwords to financial accounts, sign up for credit monitoring, and review your credit report regularly. You can also ask credit card companies to send you instant alerts each time your card number is used to make a purchase.

Whatever you choose to do, protecting your identity and credit history are worthwhile endeavors. It is usually much easier to protect yourself from fraud, than it is to undo the effects of identity theft.