Identity theft is a huge concern for young professionals and really anybody these days. Data breaches lead to our personal information (name, address, date of birth, social security number) getting into the hands of criminals. Once out there, criminals can use that information to open accounts and get loans in our names, using our personal identification. With so much of what we do being online and almost instantaneous, it is scary to think how much and how fast someone could do some major damage. Thankfully we’re not liable for fraud committed against us, but it can still be a huge pain and ordeal cleaning it up.  Your credit score is super important to maintain and protect as you’ll use it to: buy a house, buy a car, get an apartment, or even get a job. What can you do to protect yourself?

What a credit freeze is

A credit freeze is a mechanism that lets you ‘lock’ your credit and doesn’t allow new inquiries into it. A big step in the process of getting a new loan (i.e. what the bad guys would do in your name without your knowledge) is running your credit history to make sure you are a worthy borrower. Freezing your credit doesn’t allow new creditors access to see your credit info. So, without knowing your credit score, lenders would not extend a loan to you (or in this case, criminals). A credit freeze will therefore disallow any new credit from being opened in your name and will give you some peace of mind knowing that even if your identity has been stolen that there’s little they can do with it.

A credit freeze can be unfrozen and then refrozen so if and when you did need to apply for a loan, you’ll just unfreeze, apply, then refreeze. Your existing credit will continue to operate as normal, and you’ll keep paying down existing loans. Changes to existing loans can still affect your credit and current creditors can still see your credit history.

Why it’s even easier to do now

Not sure if you remember but about a year ago, one of the major credit reporting agencies (Equifax)was hacked and had 143 million (apprx 1/3 of the American population) personal identities stolen. This was shocking news, as one of the three agencies that is tasked with guarding and maintaining your credit score had been hacked! If you can’t trust the credit reporting agency to keep your data safe, who can we trust? Up until recently, it actually cost money to freeze your credit score, like a few dollars. To fully freeze it, you also had to do a freeze with each of the main three reporting agencies (Equifax, Tansunion, Experian). So, what was just a few dollars now became a few dollars * 3, as you had to do it with each of them. However, as of 9/21 it’s free to do thanks to Congress passing a law mandating that credit freezes now be free. So, is there really any downside in not freezing your credit?

Why it doesn’t stop all fraud

Unfortunately, you could still be a victim of identity theft, even if your credit is frozen. There are still lots of other ways that criminals can commit fraud. Freezing your credit only stops new accounts being opened in your name. They could still steal your existing credit cards and rack up some fraudulent charges, or manipulate existing loans. So, freezing your credit is definitely a good thing, but just know that it won’t stop all fraud, you’ll still have to be vigilant in other areas of your finances.

How you do it

As there are three credit-reporting agencies, you’ll have to set the freeze with each of them to make it effective. You’ll navigate to each of their websites and find “freeze my credit”. You’ll then fill out a basic demographic form with personal information and from there you’ll set a PIN. This PIN is super critical and will be used later when it comes time to unfreeze it. Of course there could be ways to unfreeze without your PIN if you’ve forgotten it, but as you can imagine they make that hard to do. So, don’t lose your PIN. The entire process is relatively quick to freeze or unfreeze, and it goes into effect relatively quickly.

In summary, freezing your credit report can be helpful to thwart identity thieves from opening up new accounts in your name. There are other ways that identity thieves can commit fraud against you, but freezing your credit is a good mechanism to eliminate one of the major ways of doing so. I personally haven’t done so yet as we’re in the process of trying to shop around for a new home, but once that’s all said and done, I think I’ll strongly consider it. I haven’t found any downsides to it and think it’s an easy yet solid move to protect myself.

What about you? Have you frozen your credit?