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Freezing your credit report to protect your finances

Freezing and unfreezing your credit report is now

Freezing and unfreezing your credit report is now free thanks to a recent congressional action.  Photo Credit: Getty Images/iStockphoto/i_frontier

Before you tackle lofty financial resolutions like paying off debt this year, do yourself a favor and freeze your credit reports. It's free, doesn't affect your credit score and helps protect your financial future.

Credit reports are automatically generated by the three major credit bureaus, Equifax, Experian and TransUnion. Freezing them prevents scammers from opening a new line of credit using your personal information.

The 2017 Equifax breach dramatically increased the likelihood that your personal information is out there. "The Equifax data breach exposed the critical financial information of more than half of the American adult population," says Chi Chi Wu, staff attorney at the National Consumer Law Center, a nonprofit advocacy organization. Exposed data include Social Security numbers, names, birth dates and addresses.

Why you should freeze your credit

In a world where data breaches are commonplace, freezes aren't a luxury, they are a necessity. Think of it as adding a deadbolt on your front door. You hope no one will be able to get through your existing lock, just as you hope personal data like your Social Security number stay private. But by adding the deadbolt, you have an extra layer of protection.

How credit freezes work

The process for placing a freeze differs slightly for each credit bureau, but you can take care it online or over the phone. The freeze will block new lenders from accessing your credit reports. If a bad actor applies for credit in your name, the lender can't see your reports and won't approve the application.

If you do want to apply for credit, unfreeze one or more of your reports by logging in to your account. "It's something you can do with your phone even as you're walking into your lender's office," says John Ulzheimer, a credit expert who has worked at Equifax and credit scoring company FICO. You can also designate a period of time to temporarily lift the freeze — for instance, if you're shopping for a mortgage, Wu says.

Your credit score is not affected. You can check your own credit reports with no consequences to your score, whether you have a freeze or not.

Freezing and unfreezing your credit reports is now free, thanks to congressional action after the Equifax breach. Parents also have the right to have credit reports created for their minor children and freeze them for free, Ulzheimer says. Freezing your children's credit helps protect them from identity theft.

Stay vigilant

It's a good idea to check your credit reports and credit score regularly so you can act quickly if you spot an issue.

Many personal finance websites, banks and credit card issuers offer a way to check your credit. Look for one that offers both credit score and credit report information, updates routinely and is free.

WHAT A CREDIT FREEZE DOES NOT DO

  • PROTECT AGAINST SOME FORMS OF IDENTITY THEFT. A freeze stops new credit from being opened, but if someone has the details of your existing credit card, they could make fraudulent charges on it. If they have your Social Security number, they could file a fake tax return or claim Social Security benefits in your name. You should still monitor credit card transactions and report any suspected identity theft immediately.
  • PREVENT EXISTING CREDITORS FROM SEEING YOUR REPORTS. Lenders that you already have a relationship with can still see your credit reports. Debt collectors can also access them.

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