In the wake of the Equifax data breach, which exposed the personal information of 143 million American consumers, people are wondering how they can protect their credit and their finances. One option is a credit freeze. Read all about the benefits of credit freezes below, in this article from the Winter 2015 issue of Consumers’ Research Bulletin.
If you use a credit card or share your date of birth or social security number to fill out forms, you are vulnerable to risks such as identity theft, credit card transaction fraud, or even people opening up lines of credit in your name. It’s nearly impossible to fully protect your identity and credit, given the prevalence of security breaches in commerce and even government activities involving personally identifying information (PII) such as birth dates and social security numbers.
Typically, when financial account information, such as credit card information, is stolen, it can be replicated to make fraudulent purchases. However, fraudsters can use stolen PII to apply for and receive credit cards, loans, apartment leases, vehicle leases, mobile phone accounts, and anything else that requires a credit history check – all in your name! Compared to the slight inconvenience caused by having a current account hacked (i.e. notifying your bank or credit card company and getting a new card, usually with the fraudulent transactions covered by your financial institution), it may take you a month to resolve issues caused by someone using your PII to open a new account in your name. Unlike noticing transactions you didn’t make or having the bank call you to notify you that your account was compromised, you often don’t know a fraudster has opened an account in your name until it’s too late and they have wreaked havoc on your credit score.
One thing consumers can do to protect themselves from this type of fraud is to implement a security freeze or “credit freeze.” A credit freeze, blocks third parties, such as leasing agents or credit card companies, from accessing your credit report. These third parties are usually looking at your credit history to determine the likelihood you’ll repay your debt if they give you a loan or lease you an apartment or car. If third parties cannot accesses your credit report, then they will not extend you, or fraudsters posing as you, credit. You can grant permission to unfreeze or “thaw” your credit report when you actually do wish to open a new line of credit and need to grant third parties access to your report.
To implement a credit freeze, you can call or go to the websites of the consumer credit bureaus (such as Equifax, Experian, TransUnion, and Innovis) and follow the instructions they provide. Depending on your home state, fees are roughly $10 per credit bureau.
According to a 2013 report from the U.S. Department of Justice, people “who had personal information used to open a new account or for other fraudulent purposes were more likely than victims of existing account fraud to experience financial, credit, and relationship problems and severe emotional distress.” Credit freezes aren’t free and the process may take roughly 30 minutes to set up; however, if you’re one of the unfortunate 50% of American adults whose PII has been exposed due to a hack, $30-$40 is a price you may be willing to pay for peace of mind.