Freezing your credit is a serious task, usually in response to identity theft, stolen information or unlawful credit damage. For a small fee, the three major credit bureaus — TransUnion, Experian and Equifax — will prevent third parties from accessing and using your credit information for things like opening new accounts in your name. For all intents and purposes, a freeze is intended to protect your score, but could it actually hurt? Review the items below before pursuing a credit freeze. A few considerations include:
- It won’t prevent identity theft. True, a credit freeze prevents fraudsters from viewing your credit reports and opening new accounts, but it won’t stop them from hacking into open accounts and accessing sensitive information. Lender employees may also access your account without notification, regardless of whether a freeze is active.
- It halts credit progression. Suppose you want to open a new account or apply for a loan. A credit freeze prevents these actions unless you choose to lift it, either permanently or temporarily. New accounts can help or hurt your credit by up to 10 percent. When it comes to credit score improvement, inactivity isn’t the answer.
- Change isn’t possible. Making changes to existing accounts is impossible with a credit freeze. For example, suppose you want to refinance your home at a lower interest rate or change the terms of your cell phone data plan. Both actions require a credit check, an action that will be blocked by a freeze. The only solution is to lift the restrictions every time you need access to your file.
Although a credit freeze has its benefits, there are definitely drawbacks. So, what can you do to protect your credit and minimize damage?
- Monitor open accounts to ensure that your information is secure. This strategy will prevent identity theft from open sources.
- Weigh your options carefully before pursuing a credit freeze. For example, does a stolen wallet mean a credit freeze is necessary? Perhaps, but it isn’t the first step. A credit freeze is usually appropriate only when you know your personal information has been compromised.
- In the case of a stolen wallet, a fraud alert may be preferable to a credit freeze. This option will alert you if someone is attempting to access your credit file. It also requires the third party to perform an added level of verification before gaining access.
The bottom line: A credit freeze won’t hurt your score, but it limits your ability to improve it in the future. Take advantage of other options and talk to a professional before taking action. What you learn will help you make an appropriate choice.