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Credit Freeze: What It Is and How It Works

By: Daniel Rosen Last updated: April 1, 2024

Identity theft sucks.

In 2017, hackers breached Equifax and made off with the personal data of 147 million people. And I was one of those people.

After that breach, I experienced repeated identity theft, where people kept opening new accounts in my name. I would get constant notices about new accounts I didn't recognize. I even had a letter saying that I had filed for unemployment!

I eventually closed all those fake accounts, but it was a big hassle.

Unfortunately, I'm not alone. Recorded instances of identity theft continue to soar, rising by 584% over the last 20 years. In fact, 42 million Americans were victims of identity fraud, in 2021 alone.

There are many ways to protect yourself from identity theft and fraud, but there’s a very powerful tool that most people don’t know about—a credit freeze.

A credit freeze is a prevention method that ‌puts a lock on your credit report, so no one can take out new credit in your name.

 


Rumor also has it you can also use a credit freeze as a sneaky trick to hoodwink the big three credit bureaus.

The story goes that if you have something nasty coming up like bankruptcy, you can freeze your credit with the company that supplies the public record. Then, because it’s frozen, the bureaus can’t verify it.

Boom, the bankruptcy miraculously disappears!

Or does it?

In this article I’ll answer this question, and more:

  • What is a credit freeze?
  • When and why should you consider a credit freeze?
  • How to start a credit freeze?
  • Does a credit freeze impact my credit score and report?

 

What is a Credit Freeze?

A credit freeze (sometimes known as a security freeze) is a powerful tool you can use to protect yourself from identity theft and credit fraud. It does this by temporarily restricting access to your credit report.

When this freeze is in place, most lenders and service providers won’t be able to see your credit report. This includes applications for credit cards, loans, etc.

This means that if you suspect your identity has been stolen, a credit freeze will stop the thief from being able to take out any more credit in your name.

This differs from a ‘credit lock’ or a ‘fraud alert’:

  • Credit freeze is a ‘hard lock’ on your credit reports, restricting access to outside companies

  • Credit lock is similar, but is a paid service that normally includes extra features like instant activation

  • Fraud alert flags your credit report to prompt lenders to perform additional verification steps

Despite the strictness of a credit freeze, there are a few exceptions. This includes existing creditors for open accounts, government agencies for specific purposes, and companies you’ve allowed to monitor your credit.

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Why and When to Consider a Credit Freeze

A credit freeze is a powerful tool for safeguarding your financial identity, but it’s not a one-size-fits-all solution. 

Remember that magical bankruptcy removal trick I mentioned earlier that sounded too good to be true? In that example, a credit freeze won’t help you at all. It only stops lenders from accessing your reports. It won’t stop a dispute process or wipe anything from your record.

But if you’ve experienced a data breach, lost your purse or wallet, or suspect your data has been stolen, a freeze prevents thieves from opening new accounts in your name. This minimizes your potential damage.

Also, if you’re recovering from identity theft, a freeze will help you to prevent further fraudulent activity while you secure and rebuild your credit.

Alternatively, you could implement a credit freeze if you’re seeking top-notch protection and know you won’t need new credit soon.

When deciding on whether to start a credit freeze, you need to weigh up the convenience vs the security. A freeze will give you protection, but you have to manually lift the freeze any time you want an authorized credit check to go through. 

There is also the impact on your credit score and report to consider, which I’ll explain more later.

How to Initiate a Credit Freeze

Even though every bureau is different and their processes vary, for freezing credit, there are only four simple steps you need to follow:

1. Contact the credit bureaus: Using their freeze page (links below), get in touch with each bureau you need freezing
2. Provide your personal info: Provide the information they ask for, which likely includes your name, Social Security number, and date of birth
3. Create a pin number: We will use this code later to unfreeze your credit report
4. Confirm the freeze: The bureau will confirm the freeze within one business day

This process will work for the major credit bureaus like Equifax, TransUnion, and Experian, as well as supplementary organizations like LexisNexis and Innovis.

(If you want a more detailed guide, you can read How to Freeze Your Credit Report in 4 Simple Steps from our blog)

Does a Credit Freeze Prevent Soft Inquiries?

A credit freeze prevents identity theft and fraud by restricting access to your credit report. But it doesn't completely lock down your credit information.

Companies can still carry out soft inquiries, and these searches will appear on your credit report only to you. This is because companies submit soft enquiries when they want to access your credit report for non-credit-related purposes.

This includes things like pre-approved credit cards, employment verification, and routine account reviews.

For instance, if you receive a pre-approved credit card offer in the mail, this is because the issuer made a soft inquiry into your credit.

Or—in simpler terms—a credit freeze only blocks hard inquiries, which are submitted when applying for new credit, like a loan or credit card. It doesn't make your credit report inaccessible to everyone.

So, while a credit freeze is great for preventing unauthorized hard inquiries, it doesn't completely seal off your credit report. It's essential to understand this distinction and keep it in mind.

What's the Impact of a Credit Freeze on Your Credit Score and Report?

Freezing your credit can have a few potential effects on your credit score and report, but not in the way you probably expect.

A credit freeze doesn't actually directly affect your credit score at all. Your score is calculated based on factors like payment history, credit utilization, and length of credit history. And since a credit freeze only restricts access to your report, it won't directly affect this at all.

BUT a credit freeze can have an indirect impact on your credit score and report. This is because lenders can't access your report for hard credit inquiries. This lack of new activity can temporarily lead to a slight dip in your score.

This dip will depend on the length of your credit freeze, but once you lift the freeze, the score should recover quickly.

It's also worth mentioning again that freezing your credit won't remove any existing negative information from your credit report. It won't erase late payments or impact an existing dispute process.

Frequently Asked Questions About Credit Freeze

What does freezing credit do?

Freezing your credit locks your credit reports, preventing anyone (except you) from opening new accounts or loans in your name, protecting you from identity theft and fraud. It doesn't directly impact your credit score, and requires manual lifting for authorized checks.

Does a credit freeze affect background checks?

A credit freeze won't block most background checks, but it may delay any that rely on a hard credit inquiry from specific bureaus.

How do I bypass a credit freeze?

You can't bypass a credit freeze, but you can temporarily lift the freeze if you want to carry out authorized credit checks.

What is an example of a credit freeze?

If you've reason to believe someone is trying to steal your identity, you can start a credit freeze with the bureaus, blocking the attacker from taking out any credit in your name.

Can someone else freeze my credit?

No, only you can freeze your credit report. Minors under 16 and incapacitated adults may have their credit frozen by guardians or legal representatives, but only with proper documentation.

What you should do now?

 

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Topics: Podcast

Transcript

0:00  

Have you heard of a method called freezing or suppressing credit reports? Well, there are some who swear by it, and others who say it's total crap. In this episode, I'm going to reveal the secret on whether or not this is a legit method to clean up credit. So stick around! 

 

So the big question is this. How can we take our passion for helping people with their credit and turn it into a successful business without taking loans without spending a fortune by bootstrapping it from nothing, so we can help the most people and still become highly profitable? That is the question, and this podcast will give you the answer. My name is Daniel Rosen, and welcome to Credit Repair Business Secrets.

 

As I dive into freezing credit reports, if you want to know more about how you can go from zero to Credit Hero with your very own profitable credit repair business in just 14 days, click the link in the video description down below or visit creditherochallenge.com. Okay, first things first! What exactly is a credit freeze and how does it work? Good question! A credit freeze is a service that most credit bureaus offer, which essentially allows you to lock down, suppress, or "freeze" your credit report. Now there are a few instances where this can be very helpful. For instance, in cases where identity theft has been detected or is suspected because it prevents anyone from opening new accounts in your name. Or, some people who are traveling abroad for a long period of time, they use this service for peace of mind. So they don't have to worry about identity theft while they're out of the country. Or, sometimes government officials use this service to hide their personal information from the public. But for the most part, it's just a tool to prevent identity theft. So here's what you need to know! If anyone attempts to request a frozen report or open an account without your permission, the bureau won't release it, and the lender won't be able to access your report. It's really easy to freeze your report you just call the credit bureau and request it. Okay? You can also remove a credit freeze just as easily with a phone call, and within an hour, they are required to lift the thaw or "unfreeze" your report. Now, all credit bureaus are required to offer this service, not just the big three, but also supplementary bureaus like LexisNexis, SageStream, Innovis, and CoreLogic. They all offer this as an option. Now, there are a few theories that are running rampant around the credit repair industry that claim that freezing credit reports can help repair credit. And one of those theories is if you freeze a credit report with the three bureaus, meaning Equifax, Experian, and TransUnion. And then you dispute an item that's on the frozen report, then the creditor or bureau will essentially have their hands tied, and they won't be able to verify it. And then the other theory is you can freeze supplementary credit agencies that provide information to the three big bureaus and by doing so, when you dispute with the Bureau's, they won't be able to access the supplementary Bureau and then the item you disputed cannot be verified. So for example, for this theory, if you are disputing a bankruptcy LexisNexis supplies, public records like bankruptcies to the big three bureaus. So you start by freezing LexisNexis and then you dispute with the three bureaus. Now the idea is, since LexisNexis, is frozen, the big three can't verify it, and boom, it's magically deleted. That sounds amazing. But is it true? Well, unfortunately, like most things in life, that sound too good to be true. True. It's the same for these theories. They're just false! Okay? They are not true! Here's why this is important. The truth is freezing credit reports in the attempt to stop the dispute process - it's crap! It doesn't work at all! Suppression is only to prevent identity theft or to hide information if you're a government official, or someone that could have harm done to them by making this information publicly available. So the only thing freezing credit reports does in terms of credit repair, is it stops lenders from accessing your reports, but it doesn't stop the dispute process. Now, you may be wondering, then what can I do? Well, it's simple! You can use our proven and effective methods that we teach in our basic disputing course, methods for verification, disputing accounts, sending warnings, being persistent with reinvestigations, doing interventions, filing complaints, demanding validation, and a ton of other real strategies that actually get you results. Now, right now, we're offering that certification course for free inside our 14-day Credit Hero Challenge, where we actually walk you by the hand as you launch your very own credit repair business in just a couple of weeks. And for less than it costs to take your family to McDonald's for dinner. So to join the challenge, and get the basic disputing certification course for free, go to creditherochallenge.com. And if you're finding value in this podcast, please click below to subscribe, and if you're feeling extra kind leave a review because this is a new podcast, and I can use all the help I can get. And I can't wait to see you in the next episode. And until then, keep changing lives!

 

Want more credit repair business secrets? Then get a copy of my book, The Ultimate Guide to Starting a Credit Repair Business. Get it free at creditrepaircloud.com/freebook. Inside this book, you'll find my top 35 secrets to removing items from credit reports, and turning that into an amazing business that helps people, changes lives and makes you a great living in the process. Get it free at creditrepaircloud.com/freebook.

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