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What is a Credit Freeze and Should You Use It?

What is a Credit Freeze and Should You Use It?

*Editorial Note: This content is not provided or commissioned by the credit card issuer. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by the credit card issuer. This site may be compensated through a credit card issuer partnership.

This article was last updated Apr 27, 2013, but some terms and conditions may have changed or are no longer available. For the most accurate and up to date information please consult the terms and conditions found on the issuer website.

In some states it is legal to institute a freeze on your credit, which can prevent people from accessing your credit information in a fraudulent way. This can be done for free if you were a victim of ID theft, or if you are requesting a freeze as a preventative measure, you might pay a fee of about $10 to each of the big three credit reporting agencies – Experian, TransUnion and Equifax. You also have to fill out a simple form or mail them a letter that outlines your request. Then they will not release any credit information about you without you first notifying them and telling them that it is okay to do so.

This may sound like a great way to protect your information, but it can also lead to major inconveniences. Before you decide that this is something you want to do, get the facts. Here is an overview of what a credit freeze is.

What a Credit Freeze Can Do for You

Having a credit freeze in place means that if someone tried to use your confidential credit information in a fraudulent way, like to apply for a credit card, they would not succeed because their application would be incomplete without access by the bank or card company to your credit report. No new accounts can be opened in your name, and no new loans can be taken out as long as this freeze is in place. That is a great way to protect someone who doesn't plan on asking for new credit, such as an elderly parent who may be too confused to manage their own finances anymore.

The Downside to Credit Freezes

The downside to a credit freeze is that if you try to borrow money after setting up a freeze, you will probably have to wait about 10 days for your permission to be processed, the freeze to be removed and your loan application to be finalized. This will slow down your shopping abilities, which may make you miss out on good deals. If you have an active credit account, freezing may not be for you. In other special circumstances, it can help to lock down your account by locking out identity thieves.

Should You Use a Credit Freeze?

If you plan to apply for a loan or credit card in the near future, a credit freeze would not be right for you. The amount of effort it takes to establish and then remove the fees is not worth the hassle. However, if you know that you will not be using your credit for any reason for a long stretch of time, a freeze like this provides guaranteed protection for you.

If you choose not to apply a freeze, here are some quick ways to protect your credit information: 4925973_m

  • Monitor your credit accounts on a regular basis. Report any fraudulent charges right away.
  • Check your credit report at least once a year. Pay close attention to the applications sent out in your name and the open accounts you currently have.
  • Pay for an identity theft protection service, like LifeLock.* This will send you an alert every time a change is made to your credit.
  • Be leery about any applications you file that require personal information. Make sure you are working with a legitimate business or a secure online server before giving away sensitive data.

How to Setup a Credit Freeze in Your State

The fees that you will have to pay for credit card freezes will vary by the state that you live in. Your location will also dictate the amount of time it takes to setup a freeze and have one removed if need be. Check out the information for your state:

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