What is a Credit Freeze?

avoid-identityA credit freeze, also known as a security freeze, is placed on your credit report to prevent your credit report being accessed without your consent.  The purpose is to help prevent identify theft.  Most consumers place a credit freeze when their identity has been compromised or a credit card has been lost or stolen.  The freeze does not allow potential lenders or businesses to review your credit reports.

Placing a security freeze on your credit reports

In order to freeze your credit reports, you have to contact each of the three national credit reporting agencies independently – Equifax, Experian and TransUnion.  The contact can be online for maximum efficiency. This is where you’ll set up your credit freeze.  You’ll set up a login and password/PIN in order to “thaw” or unfreeze your reports. Once you’ve thawed your reports they can be accessed.  And then, you’ll re-freeze them.

Lift a freeze

The freeze can be lifted within 15 minutes to 3 days depending upon state regulations.  To lift the freeze, you contact the three national credit reporting agencies either by email, writing or phone. The freeze is lifted between 15 minutes and 3 days depending upon state regulations.

One of the challenges is to determine the amount of time to lift the freeze when you are applying for credit.   If you plan to be seeking credit, it is not a good idea to freeze your reports.

Who can review frozen reports?

A freeze does not prevent all companies from accessing your credit reports, only new companies or businesses with which you have no relationship. The following companies can still review your credit report, even with a credit freeze:

Present lenders/creditors such as auto and mortgage lenders, credit card issuers, retail card issuers, and cell phone providers can still access and review your report.

Collection agencies working for one of your creditors can access your report.

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It can cost $3 to $10 to place a freeze on your account at each credit reporting agency.  The fee depends upon the state you live in.  It can cost the same to unfreeze your credit report to permit a new creditor to access your credit report.  This fee can be waived if you are a victim of identity theft and have a police report.

If you plan to apply for a mortgage or car loan, you shouldn’t freeze your reports.  Unfreezing your credit reports is costly and it is difficult to time “thaw.”  Freezing your credit report does not prevent fraud on your existing accounts. It only prevents new accounts from being opened in your name.

JRU on 60 Mins SetCredit Reporting Expert, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, founder of www.creditexpertwitness.com and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  You can follow John on Twitter here.