Credit freezes FAQ: You can prevent a fraud nightmare in 20 minutes

by Teresa Murray, Consumer Watchdog

March 2, 2021

Some of your worst fraud nightmares can be prevented in about 20 minutes. That’s roughly how long it takes total to freeze your credit files with the three major credit bureaus -- Equifax, TransUnion and Experian. A credit freeze, also called a security freeze, prevents most entities from seeing your information in the credit bureaus’ databases.  

Freezing your files protects you not just from someone fraudulently opening a credit card or applying for a loan in your name. It also can prevent someone from accessing your tax records with the Internal Revenue Service (IRS) or opening a Social Security account using your information or potentially launching a slew of other problems. 

In addition to our FAQ, we’re featuring step-by-step instructions to freeze your files, and you’ll hear from U.S. PIRG Education Fund Consumer Watchdog Associate Grace Brombach on her experience freezing her files online for the first time.

Here are answers to some of the questions you may have about credit freezes:

How much does it cost to freeze your file?

Freezing and thawing your credit files is free, under a federal law that took effect in September 2018. Before that, it cost anywhere from $5 to $15 in most states each time you wanted to freeze or thaw your files with any of the credit bureaus. If you were in a state that allowed a $5 fee (pretty typical), then freezing your files with all three bureaus would be $15. And if you were applying for a credit card or a new apartment a year later, you’d have to pay $15 to thaw the files temporarily.

Why did the law change?

Consumer groups had been advocating for free credit freezes for years. It took the Equifax data breach of 2017 to push lawmakers into action. Equifax disclosed that the credit files of about 150 million people -- roughly half of the adult population -- had been compromised and was in the hands of thieves.

What information is in a credit file?

The credit bureaus know more about you than you could probably remember without sitting down and putting considerable thought into it.

Of course, there are the basics: Name, address, telephone number, date of birth, Social Security number and your past employers.

After that, things like:

  • Every address where you’ve ever lived.

  • Previous names (for example, if you’ve changed your name because of marriage or adoption).

  • Current loans and credit cards, with your current balances and credit limits.

  • Every loan and credit card you’ve ever had, with the original credit limit, the date you opened the account, when you paid it off, etc.

  • The payment histories dating back seven years for every account you have: Whether you’ve had payments that were 30 days, 60 days or 90 days past due or missed a payment.

  • Whether you’ve had any civil judgments against you in the past for accounts that went to collections, or that involved unpaid taxes. 

  • The name of every company where you’ve applied for a loan or credit card during the last two years.

Why do banks or landlords look at your credit history?

If you apply for a loan or credit card or an apartment, the bank or landlord will want to see whether you have a good track record of paying your bills on time and make sure you don’t already have so much debt that you may be unable to afford another obligation. The FTC says a freeze won’t prevent a landlord from checking your credit history, but some landlords ask you to temporarily lift any freeze.

Why do places like the IRS or Social Security Administration use your credit files to open an account?

Clearly, tax records are sensitive. And collecting Social Security benefits is important. Government offices want to protect your privacy and money. You can create your account with the IRS or the Social Security Administration with all of your expected personal information, plus the ability to answer questions that rely on information that you would have in your head, not in your wallet. The information is also on your credit report. This is for added security. This is called knowledge-based authentication. The belief is that, even if someone steals your wallet, the thief won’t be able to find out things such as the name of a street you lived on 10 years ago or what kind of car you drive or the monthly payment of your mortgage or personal loan. 

But this is information that’s on your credit report. If your report is frozen, most entities can’t access it, not even the IRS or Social Security Administration. So if your report is frozen, no one can create an account in your name -- not even you -- because the IRS and SSA won’t be able to generate the questions.

If someone can breach your IRS account, they can more easily file a fraudulent tax return. Some state tax departments won’t allow you to file your income tax return online if your file is frozen because they too verify your identity with correct answers to information in your credit report. This can prevent someone from intercepting your return. 

So how can I apply for a loan or a credit card or create a tax account online if my file is frozen?

You just have to thaw your file/lift the freeze temporarily to allow access, which is easy. It takes just a few minutes. You can choose to thaw your file for a day or a week or a few weeks -- until whatever date you want.

What’s the difference between a credit freeze and a credit lock?

The credit bureaus say they’re essentially the same. But they’re not. Primarily, locks aren’t covered by federal law. If you sign up for a lock, the bureaus likely will disclose they don’t guarantee the lock will keep others from viewing your files. 

With a lock, the bureaus aren’t accountable. But freezes are covered by law and the bureaus have to answer for any mistakes or lapses. In addition, the bureaus can charge fees for locks; they can’t for freezes.

Does a credit freeze hurt or help your credit score?

It doesn't hurt your credit score. And it doesn't directly help it. A freeze can help your score if it prevents an unauthorized inquiry or fraudulent account.

Does freezing your file block everyone from accessing your credit file?

No. Existing creditors can still get your credit reports. So can prospective employers, collection agencies and government officials if they’re acting on a legal order or search warrant.

What's the difference between a freeze and a fraud alert?

A freeze puts your credit files off limits to most entities. A fraud alert is a notation in the file that a potential creditor should -- pretty please -- call you or otherwise try to verify the credit inquiry before approving any account. But fraud alerts routinely aren't honored. It's just a suggestion, not a requirement. A fraud alert also doesn't spell out how someone's identity should be verified.