When consumer credit-reporting giant Equifax revealed in 2017 that hackers had tapped into its computers and stolen the sensitive information of 143 million Americans, privacy experts reminded us that people can’t rely on institutions to safeguard their vital financial and personal data.
Consumers have few defenses against the hackers, though there are two options that can help limit the damage: credit monitoring and credit security freeze.
Credit monitoring lets you know when a fraudster has attempted to access your credit information.
A security freeze goes a step further, blocking the release of your credit report and score to anyone without your consent.
It is worth noting that security freezes do not apply to lenders you have an existing working relationship with. If an existing creditor requests a copy of your credit report, in most cases, they will get it.
Breaches like Equifax’s expose the vulnerability of databases that are central to corporate and government operations. Stolen information can be used to fraudulently open credit card accounts and take out loans, leaving victims to sort through the resulting financial damage.
The amount of damage is staggering. The New York Times reported that in 2016, 15.4 million Americans lost $16 billion through fraud stemming from identity theft. Repairing one’s finances after fraudulent activity can take many frustrating months.
Many companies offer plans to monitor your credit or attempts to use your Social Security number to obtain it. The companies typically track activity involving credit reports gathered by Equifax and two other credit reporting bureaus, Experian and TransUnion.
In principle, credit-monitoring lets you know about suspicious activity appearing on your credit report. If someone tries to open a credit card account using your personal information or tries to change your recorded home address so that bills from a fraudulently obtained card or account are sent elsewhere, the monitoring firm will notify you.
Credit monitoring services are available from companies that offer identity-theft protection plans. The three credit bureaus also offer monitoring that includes updates of your credit score and status. In all cases, fees are charged for the service.
You might wonder does credit monitoring work and is it worth the cost? Unfortunately, credit monitoring doesn’t stop fraud, it only lets you know that it’s happened. By the time the monitor detects fraudulent activity, it may be too late.
If you’re considering credit monitoring, which can cost from $5 to $15 a month, understand what you are buying. The service should track your reports at each of the three agencies and will notify you the instant a problem is discovered.
Most people assume that paying a third-party to do the monitoring is the only way to detect possible fraud. They never consider doing it themselves – for free.
Each of the three credit bureaus will issue consumers a free report once a year detailing their credit information. You can request the report whenever you like, and each bureau is likely to have similar information. A do-it-yourselfer could stagger the reports through the year, one every four months to get a regular update on what the bureaus are collecting. Even if you don’t discover a fraud, you might detect errors in your reports that need to be corrected.
You can also monitor the information that the bureaus collect. You can aggregate activity on all your accounts using software like Quicken or an online service such as Mint.com to quickly see transactions as they post to your accounts. If you see unauthorized posts, contact the bank, brokerage or credit card company to find out what happened, and then freeze or close your account and request a new card.
How to Freeze or Thaw Your Credit
Imposing a credit security freeze on your credit reports is probably the only way to prevent fraud before it happens. Each of the three credit bureaus allows you to opt to have information on your credit report withheld, effectively blocking scam artists from applying for credit using your stolen information.
Credit security freezes are effective but burdensome. If you want to get a new credit card or apply for a mortgage or car loan, you’ll need to temporarily lift your freeze so that lenders can gather the information they need from your credit report.
A credit freeze effectively locks down your credit, which safeguards your personal information but puts a crimp in your ability to borrow and establish new credit lines.
Another alternative is a fraud alert, which allows creditors to get a copy of your credit report if they take steps to verify your identity. For example, you can provide a telephone number that businesses must call to confirm you are the person making a credit request. Fraud alerts prevent criminals from opening new credit lines using your information, but they don’t stop them from using your existing lines of credit. To stop that, you need to monitor your accounts for unauthorized transactions.
All three credit bureaus allow you to freeze and unfreeze your credit if you follow procedures, which include payment of a small fee. Here’s how to do it:
- Equifax. Credit freezes can be started online or through certified mail. The cost of starting a freeze varies by state. You will receive a PIN that can be used to freeze and unfreeze your credit information. Call Equifax at (800) 685-1111 from all states but New York, visit the company’s website or write the company at: Equifax Security Freeze, P.O. Box 105788, Atlanta, GA 30348.
- Experian. Freeze can be initiated online, via certified mail or by calling (888) 397-3742. Fees vary by state and a reduced fee is available for senior citizens. Freezes can be removed online, by calling (888) 397-3742 or by writing Experian, P.O. Box 9554, Allen, TX 75013.
- TransUnion. As with the other two bureaus, freezes can be started online or by calling the company at (888) 909-8872. Fees vary by state and a cost reduction is available for seniors. A freeze can be cancelled or suspended by calling the company phone number, visiting its website or writing TransUnion LLC, P.O. Box 2000, Chester, PA 19016.
Cost of Freezing Your Credit Report
The price of freezing a credit report is not daunting, but can be aggravating, in all but seven states, where it is free.
Residents of New York, New Jersey, North Carolina, South Carolina, Colorado, Maine and Indiana receive the service at no charge.
The price in the remaining 43 states varies from $3 to $10 for each of the three agencies. In other words, to lock your credit at Experian, TransUnion and Equifax could cost as much as $30, depending on where you live.
There could be an additional charge each time you want to unlock your credit report, depending on the laws in your state.
Remember that if you have an existing relationship with a creditor – the bank that holds your mortgage or backs your credit cards, for example – that lender can request your credit report without you having to unlock it.
However, if you are actively seeking new credit, you should know that unlocking a credit report could slow the application process. If you are shopping around for a mortgage or auto loan, plan ahead and lift the freeze in a timely fashion so the loan process isn’t interrupted.
Freezing your credit offers maximum security but requires an effort every time you want to unfreeze your information to allow a company or lender to check your credit report. Removing a freeze can take hours to days and requires a payment. An alternative is a credit lock, which all three bureaus offer. Credit locking and unlocking can be done almost instantly, but costs can be greater than those charged for freezing and unfreezing. Contact the credit bureaus or visit their websites for more information.
Free Credit Monitoring
Although the credit bureaus offer subscription-based credit monitoring, you can track your own credit. As mentioned earlier, each of the bureaus provides a free annual credit report. Since all three are accessing essentially the same information, staggering receipt of the reports during the year will provide an update on your credit status, albeit not in real time. You should also track you credit score, which is available through many banks and credit card issuers at no charge. If the score drops suddenly and you don’t know why, you need to immediately search for answers from the credit bureaus.
Does a Credit Freeze Change My Credit Score?
A simple answer is available to those who worry about the impact of freezing and unfreezing a credit report: none!
Credit scores don’t change when you freeze and thaw your report, but you need to remember the status of the report. If you removed a credit freeze when you apply for a credit card, you need to remember to reinstate the freeze afterward, otherwise the protection disappears. Since there are three agencies, you have to do this three times.
One way to save a little money and effort is to find out which bureau a company checking you credit will contact. If you can get that information, you can remove the freeze from the bureau to be checked and then reinstate it. However, it is usually very difficult to get an answer from a lender, so be prepared.