In today’s digital age, protecting your personal information has never been more critical. Most of us are familiar with the risks we face due to the numerous phishing schemes where we receive an email, a text or a phone call from a scammer looking to obtain our confidential information, seeking our user IDs and passwords, or otherwise attempting to download a virus to our computers, tablets and phones. Identifying and avoiding those scams is covered in various other articles. Phishing Scams are Everywhere: Be Prepared (hbkswealth.com) Protect Yourself from Phishing Scams: How to Spot and Avoid Fraudsters Impersonating Financial Institutions (hbkswealth.com) Scammers Pretending to be IRS, Banks, Charities (hbkswealth.com) SEO Scam Alert: What Every Client Needs to Know (hbkswealth.com) Spoofers, Phishers Prey on Florida Senior Citizens (hbkswealth.com). How do you reduce your risk in situations where your personal information has been compromised due to a data breach at a third party?
Recent the news is filled with incidents where a large company has had their data systems breached, and millions of persons have had their most confidential information exposed and made available for sale on the dark web. Because of these breaches, the risk of identity theft is alarmingly high. How do you protect yourself from the risk that your information has been obtained by a bad actor who will attempt to steal your identity, open accounts and run up debt in your name? One of the most effective ways to protect against this risk is by freezing your credit. This simple yet powerful step can help prevent criminals from opening accounts or incurring debt in your name, giving you peace of mind in an increasingly insecure world.
Why You Should Consider A Credit Freeze And How They Work
There are several compelling reasons to consider a credit freeze, also known as security freeze. One of the most important is preventing identity theft which can have devastating consequences ranging from unauthorized credit accounts being opened in your name to your existing accounts being compromised. Your credit rating likely will also be negatively impacted by fraudulent activity, while it can take significant time and money to recover from identity theft and restore your credit rating. By initiating a credit freeze you take an important step in limiting these risks.
A credit freeze directs the credit reporting companies to not release your credit reports to lenders checking applications for credit. This protects your credit file by preventing third parties from accessing your credit reports without your consent. If a bad actor obtains your personal information and attempts to open an account in your name, the lender will not be able to access your credit report while checking the application, thereby preventing them from opening the account or issuing credit. By disrupting the lending process, the credit freeze is an effective tool against identity theft and fraud for many types of credit fraud.
Many people mistakenly believe that a credit freeze is only necessary if they have already been victims of fraud. In reality, it is a proactive measure that provides peace of mind by helping protect us from risks we might not otherwise see coming. You should also understand that a credit freeze, while in place, will block both fraudulent and legitimate new credit accounts from being approved. How to establish a credit freeze and allow access to legitimate lenders is discussed below.
Steps To Place A Credit Freeze
Placing a credit freeze involves a few straightforward steps, starting with contacting each of the three major credit reporting agencies – Equifax, Experian and TransUnion. Some experts suggest including Innovis and NCTUE on this list. It is important that you contact all of them individually. Many people mistakenly believe that freezing their credit with one bureau is sufficient, but to ensure full protection you must initiate the freeze with each separately as you do not know which credit bureau a lender will reach out to in any given fraud attempt. It may seem cumbersome having to contact all major credit bureaus, but it is crucial for protecting your financial information.
You can start the process by visiting each bureau’s website, calling them, or sending a request by mail. Requesting a freeze online or by phone prompts the credit bureaus to process your request within one business day. This approach is often the fastest and most convenient. If you prefer mail, the bureaus have three business days to complete the process after receiving your request.
Initiating a credit freeze requires specific information to verify your identity. This typically includes your Social Security number, date of birth, and current address. If you are requesting a freeze online or by phone, be prepared to answer identity verification questions established by each bureau. When freezing your credit by mail, additional documentation may be required which can include copies of identification documents such as a passport or driver’s license. You may also need to provide utility bills, bank statements, or tax documents to confirm your identity and address. These documents help verify that the request is legitimate and coming from the rightful owner of the credit file. Be sure to remember any access credentials established during this process as you will need them to manage your credit freeze at a later date.
Freezing your child’s credit report can also be a valuable protective step. More than two-thirds of child identity theft cases are perpetrated by someone known to the child. If you are looking to freeze a child’s credit, you will need specific documentation, including the child’s birth certificate and Social Security card. Be sure to establish the freeze with each credit bureau just as you do for yourself. The credit bureaus can create a minor’s credit report for a child if they do not have one, which can be done before the report is frozen.
Who Can Still Access Your Frozen Credit Report?
You can still access your own credit report and score even after you establish a credit freeze. This means you can regularly monitor your credit for any suspicious activities or discrepancies to identify any potential risks. This vigilance is valuable in helping to ensure your credit information remains secure. In addition to monitoring your credit reports, routinely check your financial accounts for any suspicious or unauthorized transactions. If you retain a credit monitoring service, it will still be able to access your frozen reports and notify you of any changes or suspicious activities. This dual approach of a credit freeze and regular monitoring offers robust protection against various forms of credit fraud.
While a credit freeze limits access to your credit report for the most part, some entities are still able to view it. Existing creditors, insurance underwriters, and government agencies under specific conditions are among those who can access your frozen credit report. Debt collection agencies working on behalf of your existing creditors may also have access to your frozen credit report. These accesses ensure that necessary credit-related functions, such as ongoing account management and insurance underwriting, can continue without interruption. Entities that authenticate a person’s identity for non-credit purposes such as verification for employment, rental applications, or other non-credit-related activities may also have access. Understanding who can still access your frozen credit report helps you make informed decisions about managing your credit freeze.
How To Temporarily Lift Or Permanently Remove A Credit Freeze
Freezing your credit is not a permanent decision; it can be lifted temporarily or permanently as needed. This flexibility lets you protect your credit while allowing access when necessary as there may be times when you need to allow others access to your credit report. For instance, you may be applying for a loan or credit card, buying a house, or refinancing a mortgage, and need the lender to review your credit report. Contact each reporting bureau for which you have a freeze in place, and have them temporarily lift a credit freeze and specify the period for which access should be granted. If you would like to permanently remove a credit freeze, request unrestricted access to your reports. By law this request must be completed within one hour if made online or by phone. Remembering your access credentials is essential, especially when lifting your credit freeze via phone or mail.
Advantages And Disadvantages Of A Credit Freeze
The one major advantage of freezing your credit is the peace of mind it offers, knowing that unauthorized individuals cannot open credit accounts in your name. A credit freeze represents the most robust protection for sensitive information within your credit reports, and the process is free of charge. They also allow for continuing credit monitoring while the freeze is in place.
However, while a credit freeze enhances security, it may create a false sense of safety. Individuals can still fall victim to fraud involving their existing accounts. For instance, if a person falls for a phishing scheme as referenced above, a fraudster may obtain user IDs and passwords for an existing account allowing for the theft of funds or fraudulent purchases without a credit check ever being necessary.
Impact Of A Credit Freeze On Your Credit Report And Credit Score
A common concern about credit freezes is their impact on credit reports and credit scores. Contrary to those concerns, a credit freeze does not have a negative impact on either the credit report or the credit score. While a credit freeze can lead to the unexpected denial of new credit applications, it does not mean that the credit report or credit score have been adversely affected. Rather, the denial was due to the fact that the lender was unable to review your credit report, not because of negative information in the credit report or that the credit score has been lowered. Simply reach out to the credit bureaus and grant the lender temporary access to your credit report during the application process.
Differences Between A Credit Freeze And A Credit Lock
People frequently confuse credit freezes with credit locks. While both restrict access to your credit report, they operate differently.
Once of the key differences is potential costs. The credit freeze described above is governed by federal law, and freezes and unfreezes must be offered to consumers for free. The applicable laws contain many provision designed to protect consumers. In contrast, a credit lock is a contract-based service offered by the credit bureaus. They may charge a fee for the service, meaning that you would be paying for a service that could be obtained for free via a credit freeze. Credit locks may also have contract terms designed to protect the bureau, and not have the protections afforded by the law governing credit freezes.
Another difference is that a credit freeze stays in place until you remove the freeze, with no limit on how long that period could be. Under the contract terms of a credit lock, there could be regular expiration periods where you would be required to renew the credit lock, creating the risk that you forget to renew.
Credit locks typically provide a benefit of convenience. For a credit freeze, you need to contact the credit bureau each time you want to establish or remove the freeze. By law, the bureaus are supposed to remove a freeze within one hour, but there is always a chance of technical difficulties which could delay the unfreezing process. Credit locks, on the other hand, typically operate through an app which allows you to turn credit locks off and on quickly and easily on your own.
Most experts recommend the credit freeze based on the above factors, including the significant fact that the key elements of a credit freeze are established by federal law, while the terms of a credit lock are subject to contracts written by the credit bureaus.
Summary
In summary, a credit freeze is an effective tool for protecting your credit reports from unauthorized access. By understanding what a credit freeze is, why it’s beneficial, and how to implement and manage it, you can take proactive steps to safeguard your financial information. Regular monitoring of your credit and financial accounts, even with a freeze in place, ensures comprehensive protection against fraud that involves use of credit reports.
Taking these measures not only protects your credit but also offers peace of mind, knowing that you have taken significant steps to secure your financial future. Embrace the power of a credit freeze and take control of your personal financial security today.
IMPORTANT DISCLOSURES
The information included in this document is for general, informational purposes only. It does not contain any investment advice and does not address any individual facts and circumstances. As such, it cannot be relied on as providing any investment advice. If you would like investment advice regarding your specific facts and circumstances, please contact a qualified financial advisor.
Any investment involves some degree of risk, and different types of investments involve varying degrees of risk, including loss of principal. It should not be assumed that future performance of any specific investment, strategy or allocation (including those recommended by HBKS® Wealth Advisors) will be profitable or equal the corresponding indicated or intended results or performance level(s). Past performance of any security, indices, strategy or allocation may not be indicative of future results.
The historical and current information as to rules, laws, guidelines or benefits contained in this document is a summary of information obtained from or prepared by other sources. It has not been independently verified, but was obtained from sources believed to be reliable. HBKS® Wealth Advisors does not guarantee the accuracy of this information and does not assume liability for any errors in information obtained from or prepared by these other sources.
HBKS® Wealth Advisors is not a legal or accounting firm, and does not render legal, accounting or tax advice. You should contact an attorney or CPA if you wish to receive legal, accounting or tax advice.
