How to block your credit and when it makes sense
Your credit report plays an important role in helping you achieve all of your financial goals. Lenders rely on it to give them insight into your financial history and determine if they want to approve you for new loans, credit cards, and more. Because of this, it is important to protect your creditworthiness and the information in your report.
One of the ways you could do that: a credit freeze.
What is a credit freeze?
A credit or security freeze is a restriction you can place on your credit file that prevents anyone from accessing your credit report, which in turn prevents you or others from opening new accounts on your behalf. A 2022 survey by LendingClub found that only 17% of consumers have a fraud warning and/or credit freeze on their credit reports. Overall, 10% have a credit freeze, 9% have a fraud alert, and 2% have both.
You can temporarily remove the credit freeze if you need to apply for new credit, although there are still many things you can do while your credit is frozen. Freezing your balance doesn’t limit your ability to apply for a job, rent an apartment, use your existing credit cards, access your credit score, or get insurance. And it doesn’t affect your credit score in any way.
When should you freeze your balance?
You don’t always have to have a reason to freeze your funds; It’s up to you to determine when you want to restrict access to your credit file. However, there are instances when freezing can help give you an extra layer of protection.
“This makes sense if you want to protect your credit from access or are afraid of fraudulent activities. It can also be a way to help older people who are at higher risk of being taken advantage of,” says Dawn Dahlby, Certified Financial Planner, CRPC® and Founder of Be WELLthy, a wealth management firm.
You might consider freezing your balance if you notice:
- New credit accounts or inquiries that do not belong to you
- Unexplained invoices or reminders
- Unauthorized transactions from your checking or savings accounts
- You have been notified that your personal data has been compromised in a data breach
How to freeze your balance
Freezing your credit is completely free and must be done separately with each of the three major credit bureaus – Equifax, Experian and Transunion. All three offices allow you to block your credit file online, by phone or by mail.
You will be required to provide certain Personal Identification Information (PII) such as your Social Security Number (SSN), a copy of a photo ID, and proof of residence such as a recent utility bill. If you freeze your balance online or over the phone, the freeze is likely to be instantaneous. It may take a few business days to process a ban by mail.
Once all is said and done, your credit freeze will remain in place until you contact all three credit bureaus and request that they be lifted.
take that away
Freezing your balance can provide you with additional protection if you are not currently using your balance or plan to apply for new credit in the foreseeable future. Keep a close eye on your credit report and financial accounts, and consider suspending and filing a lawsuit if you think your information or credit records have been compromised.
