Credit Freeze

What Is a Credit Freeze?

A credit freeze, also known as a security freeze, is an anti-fraud measure in which a credit bureau refrains from sharing a consumer’s credit report with any third parties. Credit freezes are often initiated at the request of consumers who suspect that their identities may have been stolen. 

To prevent thieves from using their credit information to open new accounts or make purchases, victims often prefer to freeze their credit in order to limit the damage from the theft. Until the credit freeze is lifted, no financial institutions or third parties will be able to access a consumer's credit information.

How a Credit Freeze Works

A credit freeze allows a consumer to control and restrict access to their credit report. This makes it more difficult for thieves, scammers, and other unauthorized parties to open credit in that consumer's name without their permission. Under federal law, the top three credit bureaus are required to comply with a consumer's credit freeze requests at no charge. The practice has become one of the main tools used by victims of identity theft to protect themselves.

The importance of credit freezes in disrupting identity theft stems from the fact that thieves often seek to open new credit accounts using stolen information. For instance, they might apply for new credit cards and lines of credit, to then make large purchases and leave the victim to deal with the unpaid debts. In most cases, lenders will ask to see the borrower's credit report as part of the process for opening new accounts. Therefore, by freezing their credit, victims of identity theft can block thieves from opening new accounts in their name, potentially sparing themselves from significant financial harm.

Although credit freezes can be a useful tool to defend against identity theft, they are unfortunately not a complete solution. After all, freezing one's credit does not prevent a thief from accessing accounts that have already been opened. By the time the victim realizes that their information has been stolen, the thief may have already used a victim's existing accounts to make purchases or transfer funds. For this reason, all consumers need to protect themselves early and closely monitor their account activity in order to quickly detect any suspicious changes or transactions.

Special Considerations

A credit freeze does not impact a person's credit score. It is only a proactive protection measure and does not effect a person's credit profile. A credit freeze also does not stop you from receiving your annual credit report, nor does it have any relation to you applying for a job, obtaining insurance, or renting a property.

Prescreened credit offers do not fall under a credit freeze, so to stop receiving prescreened credit offers, you will have to make a separate request by calling 888-5OPTOUT or filing an online request.

Example of a Credit Freeze

Dorothy has been a long-term customer of XYZ Company, a popular e-commerce retailer. One day, she receives an email notifying her that, due to a large-scale attack on XYZ’s servers, her customer data — including her credit card information — may have been compromised. In hearing this news, Dorothy realized that the hackers may be attempting to steal the customers' identities, in which case they would likely try to monetize this information by selling it online, making fraudulent purchases, or opening new credit accounts.

To help protect herself, Dorothy started by notifying her bank and credit card issuer about the breach, locking her credit card to prevent unauthorized transactions, and requesting that a replacement card be sent in the mail. Then, she contacted the three major credit bureaus — TransUnion (TRU), Equifax (EFX), and Experian (EXPN) — to ask them to put a credit freeze on her account.

Because of the credit freeze, any new account requests made by the hackers would most likely be rejected when the financial institution in question sees that Dorothy's credit has been frozen. By taking these measures, Dorothy would likely have bought herself time to replace her credit card and protect herself from any further damage.