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What is a credit freeze

what is a credit freeze

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A credit freeze gives you the power to seize control of your financial information by preventing the release of your credit score and detailed reports by credit reporting agencies.

The three major U.S. credit bureaus—Equifax, Experian, TransUnion—earn their money by selling your credit information to other companies. Mortgage lenders, credit card companies, car dealerships and other agencies all purchase your information to decide if you are a good credit risk.

Lenders are unlikely to approve loans unless they know you’re a good risk, so a credit freeze stops an identity thief from taking out mortgages or other debt in your name.

To place a credit freeze on your file, contact each credit reporting agency directly. Instructions are on the company websites:

If you have been a victim of identity theft it’s free to place a credit freeze on your information. Consumers aged 65 or older often receive free credit freezes, or discounts. Otherwise, you may have to pay up to $10 to each credit bureau to freeze your information. The cost is regulated by states, so the fee varies.

A credit freeze consists of three actions:

· Add - placing a freeze on your credit

· Lift -

temporarily removing the freeze so you can apply for credit

· Remove - permanently removing the credit freeze

In addition to paying to add the freeze to your file, you may also be charged to lift your credit freeze. There is no cost for removal of the freeze.

There are downsides to weigh before deciding to place a credit freeze on your file. If you are planning to buy a home or car, rent an apartment, sign up for a cell phone plan or an account with a utility company, or apply for a credit card you will need to lift the freeze. Many employers also require credit checks of potential employees. If you pay a fee each time you request a lift of the credit freeze, the cost could quickly add up.

You may request a lift for a specific company, or for a set period of time.

Another consideration is that it takes 3-5 days to lift the freeze.

A credit freeze does not apply to current creditors. Also, government agencies such as the IRS may access your information in spite of a freeze.

One final note regarding your credit score: A credit freeze does not adversely affect it.

Category: Credit

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