By C. Eric Christiansen, CFP®
Over the past decade, data breaches have become such a regular occurrence that we barely bat an eye when a new hack is announced. In the wake of these data breaches, the compromised businesses have typically offered credit monitoring services to the affected customers. It makes sense, therefore, that credit monitoring has become a robust industry over the past 10 years.
In addition to servicing businesses that have fallen victim to hacks, credit monitoring firms have also branched out to serve the public, offering a wide variety of bells and whistles. Reimbursement of stolen funds along with mobile apps and alert services are just a few of the offerings. These can be beneficial when it comes to catching and reacting to stolen identity. However, we would argue there is a more proactive approach to take.
Freezing your credit stops the fraudster from successfully applying for a line of credit in your name. To apply for a line of credit, after all, the fraudster would first need to approach a creditor with your personal information in hand. The credit agency would then attempt to pull your credit report to determine whether you qualify. However, a credit freeze restricts access to your credit report—even to lenders—so that it can be viewed only during periods of your choosing.
While our financial planners recommend credit freezes to clients routinely, their value was reinforced tenfold not too long ago when one planner received an unexpected phone call from a local bank.
“Your loan is all ready to go,” the caller said. “But we just need you to unfreeze your credit so we can run your credit report.”
The trouble was, the planner hadn’t applied for any loan! The bank had been given the planner’s full biographical profile by a fraudster—including the correct cellphone number—but the plot was thwarted at the last minute because only the planner himself could have lifted the credit freeze.
How Does a Credit Freeze Work?
You’ll need to freeze your credit at each of the three credit bureaus: Equifax, Experian, and Transunion. This process can be done online or over the phone—although in general, we’ve found the online experience is easier and faster. You will be asked some questions to confirm your identity, but it takes only a few minutes.
You can freeze your credit by using the following phone numbers and links:
- Equifax: (866) 349-5191
Freeze your credit
- Experian: (888) 397-3742
Freeze your credit
- Transunion: (888) 909-8872
Freeze your credit
To temporarily lift your freeze—for example, if you are applying for a car loan or credit card—you simply contact the bureau used by the lender. You’ll provide your PIN (issued to you when you first register) and designate the time frame for which you’d like the freeze lifted. Again, this can be done online or over the phone. It may take a few days for the freeze to be lifted, so be sure to do it in advance.
Don’t Be Fooled!
As we mentioned above, credit monitoring is now a large industry with many services and products to choose from. Once you have an interest in identity security, credit monitoring businesses—and even the three credit bureaus themselves—will try to upsell you. To the novice, the industry lingo can be misleading and confusing.
Credit alert services, or monitoring services, are typically paid subscriptions to alert you if someone has already stolen and used your identity. While not inherently bad, this type of service is reactive, whereas the credit freeze is proactive. Furthermore, the credit freeze is a free tool, whereas credit alerts are product packages. Beware of the price tags!
Despite the similar naming convention, a credit lock is not the same as a credit freeze. In fact, some vendors will require you to remove your credit freeze to enable the credit lock. However, credit locks are typically part of a paid-for product package, whereas freezing your credit is an entirely free service. As you navigate the credit freeze process, we encourage you to beware of these essential differences.
Check Your Credit Once a Year
You have the right to a free credit report from all three credit bureaus every year. Visit AnnualCreditReport.com for your free reports. If you are not already a subscriber of credit monitoring services, reviewing your reports annually is the best way to see if there’s unusual activity such as a new account, new personal information, or inquiries from lenders you don’t recognize.
However, the report does not include your credit score; that instead is typically offered for free by banks and credit card companies to customers through their designated online account access portals.
While credit monitoring services have become commonplace, and certainly provide value and peace of mind, they tend to be reactive instead of proactive when it comes to stopping fraudulent activity. Credit monitoring services are an excellent supplement to the credit freeze, but in terms of function, they cannot compare to this entirely free, critical tool provided by the three credit bureaus.