In the time it takes to count to ten, five new people will become victims of identity theft. In fact, according to the U.S. Department of Justice Statistics, identity theft is now passing drug trafficking as the number one crime in the nation–with more than 15 million victims every year.
Rather than lay awake at night worrying and wondering if your identity has been stolen, you can actually take a simple step to protect yourself… it’s called a credit freeze (or, sometimes, a security freeze). Essentially, a credit freeze gives you the ability to “freeze” or lock access to your credit file–which helps prevent someone from opening a new account in your name.
Here’s How It Works
When someone tries to open an account in your name, they’ll be stopped in their tracks. That’s because one of the first things a creditor will do before opening the account is pull a credit report.
By having a credit freeze in place, creditors aren’t able to pull your credit report. And, since very few lenders will issue credit without first seeing a credit report, identity thieves can’t open fraudulent accounts using your name. However, when you want to apply for credit, you can temporarily lift the freeze using a PIN… thus, allowing your legitimate application to be processed.
The Flip Side
First, it’s important to remember that a credit freeze only stops someone from opening a fraudulent account. It can’t stop them from using a stolen credit card. So you still need to keep the phone numbers of your credit cards handy, in case your cards are lost or stolen.
In addition, some critics argue that credit freezes have more of a downside than most people realize. That’s because you won’t be able to purchase a car, get a new credit card, or refinance a mortgage at a moment’s notice. Instead, you’ll have to plan ahead by lifting the freeze, which usually takes about three days.
For most major purchases, this won’t be much of an issue–after all, how many of us buy a car or house on a whim? Typically, we make the decision to start looking and, at that point, can easily lift the credit freeze in anticipation of the purchase. However, a credit freeze can be problematic if you’re at a department store and the cashier offers you 10% off your purchases if you open an instant credit card with the store.
Other Options
Opponents of credit freezes also argue that consumers can just as easily fight identity theft with fraud alerts, which require lenders to verify identity before issuing loans or credit. If you have reason to believe you’ve been a victim of identity theft, you can obtain a 90-day fraud alert. And if you provide reliable evidence that you are in fact a victim–using such documents as a police report–you can extend that fraud alert for up to seven years.
The problem is… fraud alerts only come into play AFTER you’ve been victimized. So for many consumers, credit freezes offer more protection and more peace of mind.
Here’s the Shocker… You May Not Have a Choice!
Believe it or not, credit freezes aren’t available in every state. Some states have yet to pass credit freeze laws. Why? Well… it all comes down to a battle between the big business of instant credit and the growing need for more secure personal information.
And, don’t kid yourself, billions of dollars are at stake in this battle! Credit-reporting agencies sell credit reports to lenders, landlords, employers and other businesses. Department stores and retailers generate huge revenues by offering instant store credit cards that boost profits through interest and increased shopping. And, finally, we as consumers have simply grown accustom to receiving on-the-spot credit for our purchases.
To learn more about these issues and to find out if your state allows credit freezes, visit http://www.ConsumersUnion.org/finance/creditfreezeinfo.htm.
Thank you to David Rider-Sterling Mortgage for this very helpful information.
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