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.
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:
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.
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.
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)
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.
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.
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.
A credit freeze won't block most background checks, but it may delay any that rely on a hard credit inquiry from specific bureaus.
You can't bypass a credit freeze, but you can temporarily lift the freeze if you want to carry out authorized credit checks.
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.
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.
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