Identity theft isn’t going anywhere anytime soon. Despite experiencing its share of ups and downs in recent years - it's on the rise in the US.
Data breaches are becoming more and more common, too. Just last year, they hit over 422 million individuals in the US, up from 128 million in 2021.
It’s becoming increasingly clear that as our world becomes more digitally connected, so do the opportunities for cybercriminals. And do you know the most significant consequence of identity theft? It’s the time and effort people spend trying to resolve the issues it causes.
That’s why you need to stay informed and on your toes, ready to take proactive steps to safeguard your financial well-being. Two effective tools to protect yourself are credit locks and freezes. Let's break down what they are and how they can help you.
Before we explore credit freezes and locks, let’s turn our attention to the three credit bureaus that form the backbone of the credit reporting system in the US.
They’re responsible for collecting your credit info and selling it to lenders to help them decide if you're a good candidate for credit. As a result, credit bureaus play a crucial role in protecting your credit report from identity theft and fraud. They're where you and credit monitoring companies turn to implement credit freezes and locks.
Though Equifax, Experian and TransUnion are the primary ones, smaller bureaus like Chex Systems, Innovis and SageStream also play a role in the system.
A credit freeze, also known as a security freeze, is a protective measure you can take to secure your credit report. It’s free, easy to put in place, and doesn’t affect your credit score.
Americans are also legally entitled to them. Thanks to federal law changes in 2018, credit bureaus are required to offer credit freezes and unfreezes. The Consumer Financial Protection Bureau keeps a close eye on this to ensure credit bureaus comply.
This means you can freeze and unfreeze your credit report whenever you want or need to, free of charge. It also doesn't get in the way of applying for a job, renting an apartment, or purchasing insurance.
With a credit freeze in place, it’s harder for identity thieves to open new accounts in your name and access your credit report. When you freeze your credit files, you essentially lock them down, preventing creditors from approving new credit in your name.
However, you're not stuck if you need to apply for credit or allow access to your credit report while you have a credit freeze in place. You can temporarily lift or “thaw” the freeze at any time.
For instance, if you're applying for a new credit card, you would temporarily lift the freeze to allow the credit card issuer to check your credit. Once you do this, your freeze will automatically be reactivated once the temporary lift period ends or when you manually choose to reapply it.
Each of the three main credit bureaus has its own processes you need to follow to put credit freezes in place. Keep in mind that when you place a security freeze at one of the credit bureaus, it doesn't automatically apply to the others. If you want to freeze your credit with all three major bureaus, you'll need to reach out to each of them individually.
Also, note that each bureau will aggressively try to upsell you to their monitoring service as you try to freeze your credit. You do not need to subscribe to their paid services to freeze your credit.
To put an Equifax credit freeze in place, follow these steps:
Here’s what you need to do to implement an Experian credit freeze:
To keep your credit safe and sound, you can implement a TransUnion credit freeze by following these steps:
The US government laid down some rules surrounding the time frames of credit freeze and unfreeze requests that credit bureaus need to follow.
A credit lock, like a credit freeze, prevents access to your credit report. Though it functions in much the same way as a credit freeze, there are some differences to keep in mind.
Credit locks come with a fee and are typically offered as part of a paid subscription with credit monitoring services. These services usually provide ongoing monitoring of your credit report and might include features like identity theft protection and credit score tracking.
Credit locks are sold as allowing for more flexibility – but we have generally found that freezes are flexible enough for most people.
If you’re deciding between a credit freeze and a credit lock, we recommend sticking with a freeze unless you have a specific need to use a lock, or if you get free credit monitoring that comes with locking service as a result of having been the victim of a breach in the past.
Locking your credit is easy and straightforward, but comes with a cost. Since it’s not mandated by law, like credit freezes, the process is different. Just follow these steps:
1. Pick a Service: Start by choosing a credit bureau or monitoring service that offers credit locking. You may have access to free credit monitoring if you’ve been affected by a past security breach, and it’s fine to use those services for this purpose as well.
2. Create an Account: Visit the credit bureau's website or download their app. They'll ask you to create an account with a unique login. Use a strong, unique password for your account, ideally stored in your password manager; this is a sensitive financial account and you should treat it as carefully as you treat things like banking passwords.
3. Lock Your Credit: Once your account is set up, you can easily lock your credit with a few clicks.
4. Unlock When Necessary: If you ever need to apply for credit, like getting a loan or a new credit card, just sign into your account to unlock your credit.
Your credit lock doesn't have an expiration date, just like freezing your credit. It stays locked until you decide to unlock it. But, a little heads-up - if you're using a credit lock as part of a paid subscription service, keep in mind that it might expire if you forget to renew your subscription. At that point, you can always place a credit freeze instead.
To manage your financial security effectively - you have free resources at your disposal. For instance, the official Annual Credit Report site gives you a yearly snapshot of your financial history, and Opt Out Prescreen reduces unwanted credit offers and identity theft risk. You can also learn more about your credit report on the official U.S. government webpage.
Some credit cards offer free credit score and report information – Bank of America and Chase both offer this service to their customers. There are also tools like Credit Karma that provide additional information, but it’s worth noting that they make money by getting you to sign up for financial products like new credit cards through them, so take their guidance on what products to use with a grain of salt.
Beyond credit freezes and locks, some employers provide credit monitoring benefits in their employee packages. This can include identity theft protection and financial wellness programs, often offered at no extra cost. However, in some cases, employees may have the option to pay for these benefits themselves through payroll deductions.
Credit monitoring keeps you updated about any changes in your credit report over time, while credit freezes provide a fixed level of protection for free, without any updates. Make sure to reflect on your individual needs and budget before opting for one over the other.
Overall, the United States has a well-established system for credit protection. Compared to other countries, like Canada, its credit security measures offer a robust defence against identity theft and fraud. If you ever worry about the safety of your credit - don’t hesitate to reach out and take advantage of these tools.
