Understanding Credit Freezes
In the United States, everyone has the right to contact the major credit agencies like Equifax, and ask them to put up a fraud alert. This alert means that you will have to be contacted whenever an application of credit is attempting to be put in your name. You can ask for a fraud alert but none of the companies have to comply.
A credit freeze, which was first allowed back in January 2003 to victims of identity theft, allows you to have much more control over your credit and its history. Once you place a credit freeze on file, neither a company nor individual is allowed to access your credit report. Many businesses dislike this new law because it blocks employers, lenders and insurers from your credit files. In November 2007, bowing to consumer pressure and impeding federal law (still being discussed), the credit agencies allowed freezes in every state, regardless of whether you were an identity theft victim or not.
How Do They Work?
A credit freeze does not mean that you have to stop large parts of your life because you won’t allow anyone to check your credit history. However, if a company were to request for your file, they would be denied. Because of this, they will most likely deny your application for a new credit card or loan because they can’t find out more about you without seeing your prior credit history.
To counteract this problem, anyone who places a credit freeze on their credit will be issued a personal identification number (PIN) by the 3 major credit agencies. This PIN will allow you to unfreeze your accounts whenever you need to with little hassle. A company like TrustedID will give you the ability to do this with a simple web-based on/off switch.
A freeze on your credit means that an identity thief could have all of your private information, such as your social security number, your mother’s maiden name, your address and birthday. Regardless of how much information they have on you, they will not be able to ruin your credit because it will be locked to anyone who does not have that PIN. To start a freeze, all three of the credit reporting agencies will need to be contacted. The cost to freeze your credit report is $10 each (varies by state) and you will need to pay another $10 when you want to unfreeze it.
Credit Freezes and the Government
In some states like Delaware, if you are a victim of identity theft, all fees will be waived. Although most states require a $10 fee for the freeze, some states charge a lower fee and others ask consumers to pay more for the service.
Credit freezes are being embraced by consumer advocates, but when it was first being discussed and suggested, credit reporting agencies and retail companies such as auto dealerships did everything that they could to stop it from being conceived. They finally settled on an agreement to create the special PIN so that consumers could have their credit accounts unfrozen in a matter of minutes.
Opposition to Credit Freezes
Why would the credit reporting companies hate the concept of credit freezes? Though it helps protect consumers from identity theft, it costs the credit bureaus in lost revenue. They sell your information to others who need to find out your credit info before giving you a loan, rental property, vehicle or job. A credit freeze denies them from doing this. Therefore, their income can potentially drop, and as all of the credit reporting agencies are for-profit, public corporations, this could spell trouble.
Auto dealers and other companies who depend on consumers to spend money on a whim did not want the freeze to occur either. If someone has to go through a few steps before they can spend large amounts of money, they will have time to think over the purchase and may change their minds.
Depending on your point of view and your occupation, credit freezes are either a good or a bad thing!
Subscribe to this site
Email This Page
