In today’s internet age, data breaches have become more prevalent. Whether it is Facebook or Target, many giant organizations have fallen victim to periodic hacking that has resulted in data leaks, especially the private information of individuals.
Breached information often includes people’s credit card data, driver’s license, date of birth, mobile phone numbers, email addresses, etc. Due to such rampant breaches, people want to be extra cautious as far as the sharing of private information is concerned. This is when credit freeze can help in tackling data breach or theft problems.
Let’s learn more about credit freeze as it becomes a must-know factor, especially while using financial products like credit cards.
What is a Credit Freeze?
- Meaning - With increasing data breach cases, data security experts recommend consumers “freeze” their credit. Freezing of credit refers to the prevention of fraudsters looking to steal an individual’s identity by opening unauthorized accounts in someone’s name. By “freezing” credit, you are mainly locking down the credit information and thereby, preventing access by fraudulent people who can use your account details and indulge in acts of crime and fraud.
- How it Works - Here is an example to better understand the concept of a credit freeze. Suppose, a person named Shilpa applies for a credit card or a loan from a bank. As soon as the bank receives her application, it will try to determine whether she is creditworthy. Thus, the bank will check her credit report and score. A credit report will be sourced from a credit bureau like CIBIL™, Equifax, or Experian. Depending on Shilpa’s credit score, the bank will decide on whether to lend any credit to Shilpa or not. Shilpa may not be comfortable sharing her private details included in the credit information with anyone other than the bank. For this, she can request all the credit reporting agencies for her credit report to be “frozen”. This means the details around her credit report will not be shared with anyone except the financial institution that she has authorized.
- Features of Credit Freeze – Some of the key features of credit freeze are:
- Your credit information will still be accessible to certain entities like your bank after a credit freeze.
- You can still access your credit information and get your free credit reports whenever you want.
- Your existing creditors will still be able to access your credit information.
- A credit freeze will have zero impact on your Credit Score-it will neither harm nor help it.
How Do You Freeze Your Credit?
For credit freezes, you’ll have to reach out to all the credit bureaus separately and follow their separate processes since they could be different from each other. The process will require you to disclose some of the necessary details for investigating the matter and digging up your information to further lock it.
After the credit bureau implements your credit freeze, no one can access your credit profile unless you provide explicit authorization to the respective credit bureaus.
What Are the Benefits and Disadvantages of a Credit Freeze?
Here are some of the main advantages and disadvantages of a credit freeze that applicants must be aware of:
- A credit freeze can prevent identity theft as it blocks potential new lenders from accessing your credit information without your permission.
- Credit freezes can be sought for free.
- You can get a credit freeze temporarily lifted when there is a need for credit information to be checked by a credit bureau.
- For lifting back credit freeze, you will have to reach out to each bureau separately. This can be a time-consuming process.
- A credit freeze can hold your other priorities, especially if you plan to apply for a Credit Card, Personal Loan or Home Loan. This will require you to lift the credit freeze and since it can be time-consuming, your application process could be delayed.
- A credit freeze may not help to protect the data in case of fraudsters already have access to your personal information. This can be true especially if you’ve been a victim of any banking fraud.
A credit freeze can prove to be helpful if you’re looking for data protection from any fraudulent activities or data breaches. It can also help in reducing your chances of falling victim to identity theft. However, it could be a cumbersome process, hence, weigh in all the factors before opting for a credit freeze.
- Does a credit freeze hurt your credit?
A credit freeze will not have an impact on your credit score. It also doesn’t prevent you from getting a free annual credit report.
- What does it mean to request a credit freeze?
A credit freeze helps you to restrict access to your credit report. This means potential creditors will not be able to access your credit report without your permission. The main intent of a credit freeze is to prevent identity theft while requesting new lines of credit.
- Is credit freeze a good idea?
It can help you stay safe from identity theft. A credit lock also limits access to your credit report, thereby protecting personal data.
- Can I use my credit card if I have requested a credit freeze?
A credit freeze doesn't have any impact on your credit card accounts. Thus, freezing your credit doesn't impact your ability to use credit card accounts.
- How do I request a credit freeze?
You can request a credit freeze by reaching out to various credit bureaus individually and following the stated procedure to initiate the request.