In May of 2018 Congress passed the Economic Growth, Regulatory Relief, and Consumer Protection Act, which included changes to credit rules that benefit the consumer. These were implemented partly in response to the Equifax breach that impacted thousands of individuals.
One of the significant changes enables consumers to “freeze” and “unfreeze” their credit reports free of charge at all three major credit reporting bureaus: Equifax, Experian and TransUnion. In the past, consumers had to pay to set up a credit freeze at each credit reporting agency.
What is a credit freeze? It is a process that prevents new credit accounts from being opened in your name. Usually, new prospective creditors want to view an individual’s credit report. With a credit freeze in place, they are unable to do so. With no credit report, lenders will probably not open a new account, thus helping to prevent potential identity theft.
The new law extends free credit freeze protection to children under age 16. It may seem hard to believe, but minors are an attractive target for identity thieves. This age group has less credit and usually little reason to use it. As a result, their financial history might not be monitored as closely, which can be a perfect situation for identity thieves.
To freeze your credit, you will need to contact each credit reporting bureau. When you establish the freeze on your credit you will be given a password and/or a PIN. Keep track of these items. The freeze on your account is permanent until you unfreeze it. You might want to do so if you need to borrow funds (for example, a car loan), are applying for a job, or trying to rent an apartment. You will need the password and/or PIN to unlock your credit.
Just how much time does the credit reporting bureau have to honor the consumer’s request? If a consumer asks for a freeze online or by phone, the agency has to put the freeze in place no later than the next business day. If the consumer wants to lift the freeze, this has to happen within an hour. This will help ensure that credit reporting is available for emergency credit situations.
Are there any alternatives to a credit freeze? One that you might want to look into is a fraud alert. This requires lenders to go the extra mile to verify your identity before extending existing credit or issuing new credit in your name. The creditor needs to make sure it is you requesting the credit.
Initiating a fraud alert is a bit different than initiating a credit freeze. You need to contact one of the three major credit reporting bureaus. The bureau that you place the fraud alert with is responsible for passing it along to the other two bureaus.
In the past, fraud alerts expired after 90 days unless they were renewed. Now, this protection will last a full year. Keep in mind that fraud alerts don’t have the same level of protection as a credit freeze.
Credit freezes and fraud alerts are important tools in gaining control over who is accessing your credit report. One last point to consider: a freeze does nothing to prevent thieves from using the credit you already have. Make certain to monitor your current credit card statements and fraud alerts. They don’t protect you from tax identity theft.
If you need more information, you can visit the website of each credit reporting bureau. The new law required the bureaus to set up a webpage devoted exclusively to requesting credit freezes and fraud alerts. The Federal Trade Commission’s website, IdentityTheft.gov, also has additional information.