Security freeze

What Is a Security Freeze?

A security freeze, often referred to as a credit freeze, is a powerful consumer protection tool that restricts access to a consumer's credit report at the three major credit bureaus: Equifax, Experian, and TransUnion. This measure helps prevent identity theft and financial fraud by making it significantly harder for unauthorized individuals to open new accounts, such as credit cards or loans, in your name. Within the broader category of consumer protection in personal finance, a security freeze serves as a proactive defense mechanism, ensuring that most prospective creditors cannot view your credit file without your explicit permission.¹⁵

History and Origin

The concept of a security freeze gained traction as a vital tool in response to the growing threat of identity theft. Initially, the ability to place a credit freeze varied by state law, and consumers often had to pay a fee to place or lift these freezes. However, a significant shift occurred with the passage of the Economic Growth, Regulatory Relief, and Consumer Protection Act in 2018. This federal law mandated that the three nationwide credit reporting agencies offer free credit freezes and unfreezes to all consumers.¹³, ¹⁴ Signed into law on May 24, 2018, the provisions for free freezes went into effect on September 21, 2018, marking a pivotal moment in consumer rights regarding credit reporting.¹¹, ¹² This legislation also extended the duration of fraud alerts and allowed parents to freeze the credit files of their children under 16 years of age.¹⁰

Key Takeaways

• A security freeze prevents access to your credit report, deterring identity thieves from opening new accounts.
• It is a free service offered by the three major credit bureaus (Equifax, Experian, TransUnion) under federal law.
• Placing a security freeze does not impact your credit score.
• You must contact each of the three credit bureaus individually to place or lift a security freeze.
• A security freeze can be temporarily lifted (thawed) or permanently removed when legitimate access is needed for new credit applications.

Interpreting the Security Freeze

A security freeze is a binary state: your credit report is either frozen or unfrozen. When a security freeze is in place, it signals to potential lenders and other entities that your credit file is locked down. This means they cannot access your consumer reporting agency file to evaluate your creditworthiness for new accounts.⁹ The presence of a security freeze on your file indicates a heightened level of protection against unauthorized inquiries. It does not affect your existing credit accounts or your ability to receive your annual credit report. It also typically does not block access for existing creditors, government entities like child support agencies, or companies you've hired for credit monitoring.⁸

Hypothetical Example

Consider an individual, Sarah, who receives a notification about a major data breach at a company where she once had an account, potentially exposing her personal information. Concerned about the risk of identity theft, Sarah decides to place a security freeze on her credit reports.

She visits the websites of Equifax, Experian, and TransUnion. On each site, she navigates to the security freeze section and follows the prompts to initiate a freeze. She provides her identifying information, such as her name, address, and Social Security number. Within one business day of her online request, each bureau confirms that her credit report is frozen.⁷

A few weeks later, Sarah decides to apply for a new credit card. Before submitting her loan application, she logs back into the credit bureau websites. For each bureau, she opts for a temporary lift (or "thaw") of her security freeze, specifying a period of 48 hours. This allows the credit card issuer to access her report for the application, after which the freeze automatically reinstates.

Practical Applications

The primary application of a security freeze is to protect against financial fraud, particularly identity theft. It is highly recommended for individuals who:

• Have been victims of identity theft or suspect their personal information has been compromised.
• Are concerned about potential future identity theft due to a data breach.
• Wish to proactively secure their financial profile, especially for children who do not have established credit histories.

By initiating a security freeze, consumers prevent new financial institutions from pulling their credit report for new account openings. This dramatically reduces the risk of fraudsters obtaining new lines of credit in the consumer's name. Consumers can learn more about identity theft and recovery plans from the federal government's resource, IdentityTheft.gov.⁶

Limitations and Criticisms

While a security freeze is a robust defense against new account fraud, it has certain limitations:

• Existing Accounts: A security freeze does not prevent fraudulent activity on existing accounts. If an identity thief gains access to an existing credit card or bank account, a freeze will not stop them from making unauthorized purchases or withdrawals. Monitoring existing accounts remains crucial.
• Access for Other Purposes: A freeze generally does not restrict access to your credit report for certain purposes, such as requests from existing creditors, agencies for debt collection, or in some cases, for employment, tenant screening, or insurance purposes.⁵
• Coordination Required: Consumers must contact each of the three major credit bureaus (Equifax, Experian, and TransUnion) individually to place or lift a security freeze. There is no single central system. This can be cumbersome if a freeze needs to be repeatedly lifted and reinstated.
• Impact on Legitimate Applications: When a security freeze is active, any legitimate application for new credit, insurance, or services that require a credit check will be denied unless the freeze is temporarily lifted or removed. This necessitates planning and action from the consumer.

For a comprehensive understanding of consumer rights related to credit reporting, the Fair Credit Reporting Act (FCRA) outlines the regulatory framework governing consumer reporting agencies.⁴

Security Freeze vs. Fraud Alert

A security freeze and a fraud alert are both tools designed to protect consumers from identity theft, but they function differently.

A security freeze offers a higher level of protection by actively blocking access to your credit report. A fraud alert, on the other hand, acts more as a warning sign, advising businesses to verify your identity before extending new credit. While both are valuable components of a sound financial planning strategy, a security freeze provides a more definitive barrier against unauthorized credit inquiries.

FAQs

How much does it cost to place or lift a security freeze?

Under federal law, placing and lifting a security freeze with Equifax, Experian, and TransUnion is free of charge.

##²# How long does it take for a security freeze to go into effect or be lifted?

If you request a security freeze online or by phone, it must be placed within one business day. If you request to lift the freeze online or by phone, it must be lifted within one hour. Requests made by mail may take up to three business days for placement or lifting.

##¹# Does a security freeze affect my existing credit accounts or credit score?

No, a security freeze does not affect your existing credit accounts, nor does it impact your credit score. It only prevents new creditors from accessing your credit report for new account applications.

Will a security freeze stop me from receiving pre-screened credit offers?

No, a security freeze does not stop you from receiving unsolicited "pre-screened" offers for credit or insurance. To opt out of these offers, you need to make a separate request through OptOutPrescreen.com or by calling 1-888-5-OPTOUT.