How to Stop Credit-Based ID Theft with a Credit Freeze
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Saturday, October 17th, 2009 (23 comments) |
The Problem
Scenario: A drug dealer gets a cellphone to make drug deals. They sign a lease in your name, hook up electricity, and then go shopping for supplies all in your name. What do all of these have in common? Each of these requires a credit check.
A credit check for the phone, a credit check for the lease, another for the utilities, and the last for the store's credit account. The real problem with identity theft isn't the thieves (who have always been there), it's the system that makes it so easy for them to get goods and services while leaving you with the bill. How does this happen!?
Credit checks are done at one of the three major credit reporting companies (which some people call credit reporting agencies or bureaus, but I'll call CRCs for short). Because their business is about collecting and reselling your personal credit information, they hardly have any motivation to be careful with who they grant your data to. Similarly, salespeople and sales managers who are under constant pressure to meet their "numbers" for profit, services, and such also have very little motivation to look too closely at a "high margin" sale.
In the end, it's up to you to protect your credit. Fortunately, it's pretty easy.
The Solution
The real problem here is how quickly and easily a CRC will hand over your data which a retailer will then use to ring up debt in your name (a serious problem when the person in the store isn't you). By blocking the ability of a CRC to sell your data, you eliminate the bulk of credit-based ID theft (there are types of ID theft that don't involve credit, but they're more rare and we'll cover them next).
Fortunately, there was a movement to pass laws in the various states allowing you to do just that. In 2007 when enough states had already passed laws, the three CRCs "voluntarily" allowed people in every state to freeze their reports (at worse terms than most states mandated).
Freezing Random Access to Your Credit Reports
Go to the three CRC's freeze pages online
Experian Freeze Page
Transunion Freeze Page
Equifax Freeze Page
- Enter your data including which state you live in
- Pay a freeze fee (which varies by state, but is waived for prior ID-theft victims)
- Wait for your freeze PIN in the mail.
That's essentially it. Once you've followed the directions, you should receive a letter in the mail which provides a long number (a freeze PIN) that you'll need in the future to "thaw" your credit report for the people you actually want to allow access. In all other cases, any new credit inquiries will be blocked (this won't affect people you already have a credit relationship with like current credit cards and accounts).
Thawing Your Report
A "thaw" is when you open access to your report for someone. Better states mandate your right to thaw in the following two ways:
Time Based
- Contact the CRC by phone or through their website.
- Provide the freeze PIN along with a date range
- Pay a fee for the thaw (varies by state, but is free for prior ID theft victims).
Once complete, access to your credit report is open for the time period you specified. This is most useful when several different companies need access to your credit report at once.
Company Based
- Contact the CRC by phone or through their website.
- Provide the freeze PIN along with the name of a company.
- Note the temporary PIN they provide you.
- Give the temporary PIN to the company that you're applying for credit with.
It's pretty straightforward, but you have to remember two things. First, NEVER give your freeze PIN to anyone except the CRC themselves. For this to work, you must be the only one who has the PIN.
Second, when you go to apply for something that requires a credit check, ask them which CRC they use so you can thaw the right one. There's no sense taking the time and trouble (not to mention the cost) to thaw more than you need to.
Drawbacks
Having a credit freeze will naturally introduce a delay when getting credit. If you are the type to apply for instant-credit deals, you might find this to be cumbersome. Keep in mind that having a little time to actually think for a few extra minutes (up to a day or more) before adding to your debt really can't be such a bad thing.
Freezing is cheap, but thawing has a per-use cost. If you do that enough times in a year, it can add up. However, how many times per year do you actually apply for brand new credit? Credit cards, store accounts, change of cell phone or TV service. Even if you did check your credit a lot in a single year, you can lower the cost by doing a time-based thaw and planning for several checks in the same time period.
Besides; if you filed a police report or a FTC complaint of identity theft in the past, you can provide that to the CRCs to have your freeze and thaws for free for life!
So Do It!
Experian Freeze Page
Transunion Freeze Page
Equifax Freeze Page
Sadly, credit-based ID theft is not the only kind there is. While the others are more rare, they can be far more devastating. Next, learn how to defend your non-credit data as much as is possible.
Thanks for the comprehensive guide. I completely agree that locking your credit is the only way to go to truly protect one’s identity and credit history.
The key is to help everyone else learn it to. Credit reporting companies lobbied hard to keep the freeze laws from passing, but now that we’ve won, it doesn’t do us much good until people know it’s there and actually use it!
I have been reading everything that you have to say about freezing credit. I have a question regarding that. If I were to freeze my credit and later in time wanted to purchase a house, I would now have to go through the process of unfreezing it correct? So after I pay to unfreeze my credit, is it just giving a me a certain time limit before it closes again or would I have to pay again to freeze it back up?
Not unfreezing it. A temporary unfreeze is called a “thaw” and you can do a company-based thaw or a time-based thaw (depending on the state, but I think most allow both). The price for either is the same and usually is the same as what you spend to freeze it in the first place.
Either way, once you apply for a thaw and pay the thaw fee, your credit can be accessed by only that named company one time (at which point it’s locked automatically (and isn’t open to anyone else during that time). If you think you need to allow several credit checks in a short period, a time-based thaw might be better. The time thaw allows ANYONE in, but only for a short period. Clearly this is less preferred because identity theft becomes more possible when your report is open for access, but due to the small window of time (usually a few days or a week, your choice), it’s still better than having it unlocked all the time.
now this is all interesting to me, but i live canada
can i freeze and thaw up here?
Not sure. I’d have to research it.
Bill C-29 for Canada
http://www.parl.gc.ca/HousePublications/Publication.aspx?Pub=Bill&Doc=C-29_1&Language=&Mode=1&Parl=40&Ses=3
Merry Christmas & New Year!
Equifax requires you to MAIL in your name rank and serial number and other crap just to get a 10 digit pin!!!!!!
The address is-
Equifax security freeze
po box 105788
atlanta, ga 30348
Considering all of the thieves there are in the USPS system the address is enough to show some potential thief that the contents of the letter is worth his while to open.
However, Equifax has it’s own form of ID theft for something like $14.95 per month. Well, well….what a miracle that is!
I did it through the Internet which was faster and safer:
https://www.freeze.equifax.com/Freeze/jsp/SFF_PersonalIDInfo.jsp
But it is a MYSTERY isn’t it? The freeze is hard, but paying them for their “protection” isn’t.
Thanks for this comprehensive guide! It’s now time to ditch LifeLock- I actually wasn’t aware that the “fraud locks” that they use so extensively had been rendered ineffective with recent legislation. A real freeze is definitely the way to go!
Indiana & South Carolina passed laws that allow their consumers to place, thaw, or permanently lift security freezes with all of the CSCs at NO COST. I am curious why more consumer groups haven’t effectively lobbied for the same benefit for all consumers. My wife & I have had our credit frozen for 4 years and have had no problem thawing it when we financed a car or refinanced our mortgage (effective immediately if done online). Our credit score has gone up during this same period, we don’t receive junk mail (also used optoutprescreen.com) and have not had to pay a dime for this piece of mind since we live in Indiana. Even if you have to pay, a credit freeze is the best investment you can make in preventing financial ID theft…great article!
Consider that credit reporting companies make money only by collecting and reselling your information. Each person who they can’t prevent from freezing a report is a loss to them. You can surely see why they lobbied so hard and so long to prevent these laws from passing.
Good news for people in SC though! Thanks for the tip
Jeremy,
I appreciate your articles warning people of companies like lifelock and also giving better alternatives. I was just about to sign up for LL when I decided to look up some reviews, so again thanks for saving me. My wife and I recently had a lot of personal information stolen, (bank account statements, credit card statements, SSN, pretty much everything criminals would need)I’m pretty sure thats not what they were looking for but regardless they have it now. I was wondering what you would recommend moving forward? Besides just the credit freezes is there anything else I should do? These past few days have left us feeling pretty helpless regarding security so any info you could give would be greatly appreciated.
Thank you
Just freeze your credit reports and be careful with your information. Until they give us the right to lock or removes our even bigger reports with the data brokers, there’s not a lot else you can do. The good news is you can at least stop most of ID theft with a freeze and the rest is just about learning to be more private. You CAN get your name off some data broker lists. There’s a manual way to do it and you can pay to have it done: http://www.thegeekprofessor.com/rps/opt-out-detectives/
recently lost my job after 35yrs. i have never heard about credit files ’til now, is it wise to check it? is wise for anyone to claim their cfile?
tia
So you never applied for any credit cards or car loans, house loans? Or when you did, you didn’t know they were checking your “Credit Reports”?
That’s cool if you don’t use credit for things (most of us shouldn’t), but you probably have a credit report anyway. Just freeze the reports and don’t worry about them. You don’t have to do anything different.
yes i have applied for loans, but never occurred to me the credit file was my responsibility
why don’t schools teach this stuff to our kids, this should be a prerequisite on safety
thank you very much
Most people beleive that credit is all your responsibility. Even though companies have spent years and millions finding clever ways to make it harder for you to manage your money, it’s still your fault.
I don’t really see it that way, but at least we have freeze laws. They shouldn’t cost us anything, but beggars can’t be choosers at the moment.
Ok so if i freeze my credit and then go to apply to rent a house will i have to thaw it for my credit to be run for the rent application?
Yes you will. This is just the system working as intended in that no one who doesn’t have an existing credit relationship with you should be able to see your credit unless you unlock it for them ahead of time.
Do be aware that many places check your credit because they can, but they don’t actually need to. Both my electric and cable companies tried, but I told them to shove off. I got service anyway.
ok awesome thanks for your help
do i need to “thaw” whenever i check my credit score (through annualcreditreport)???
No. You have the same access to your own reports as you used to.