With the recent news about data breaches and concerns that even the IRS can be vulnerable to identity thieves looking for information, it’s no surprise that many consumers are wondering how safe their own identities are. According to the U.S. Department of Justice, there are, on average, 12 million victims of identity fraud as of 2014. If you are concerned about how identity fraud could impact your credit and your finances, you might consider a credit freeze.

What is a credit freeze?

It’s possible to instruct the credit bureaus to stop allowing new creditors to look at your credit report and your credit score. It can also prevent fraudsters from opening accounts in your name. This is one way to stop scammers from claiming your identity and using it to run up huge debts.

In order to receive a credit freeze, you need to contact each of the three major credit bureaus and request it. You need to make sure you contact each bureau individually; freezing your credit at one bureau will not freeze it at the other two.

Realize that when you freeze your credit you will limit your ability to apply for credit. While it’s possible to lift a credit freeze so that you can get a new loan, it does add another step to the process. If you expect to apply for a home loan, car loan, credit card or any other type of credit soon, you might want to hold off on the credit freeze until after you have completed your transaction. This is an important consideration because it can take a few days to lift your freeze. If you are looking for fast action on a loan, having a freeze on your credit can slow things down considerably.

Freeze your credit after identity theft

The best reason to freeze your credit is after you have been the victim of identity theft. Once you realize that someone else is using your information fraudulently, you need to take action to freeze your credit. In fact, the government recommends that you place a fraud alert on your credit report right after you call the companies where the identity fraud occurred.

However, a fraud alert is not the same as a credit freeze. The fraud alert requires companies to contact you to verify your identity before extending credit, and it is only in effect for 90 days. At that time, you can either renew your fraud alert or decide to let it expire. You can also place an extended fraud alert on your credit that lasts for seven years.

If you have been the victim of identity fraud, you might consider placing a true credit freeze on your account until everything is squared away. The reality is that, in some cases, it’s still possible for fraudsters to slip through the cracks when you have a fraud alert, since some can find other ways to “verify” their identity as you when they apply for credit.

Also, there are other limitations to a credit freeze or fraud alert. An identity thief might have trouble using your information to open new accounts, but he or she can still use your existing accounts. It won’t stop someone from using your credit card information to run up charges. It also won’t stop current creditors (or their hired collection agencies) from looking at your report, or government agencies from looking into issues related to taxes and child support. So, don’t put a freeze on your credit and expect to hide from delinquencies.

Cost of a credit freeze

A credit freeze isn’t free. Each of the bureaus charges its own fee when you freeze your credit. Depending on your state of residence and the credit agency involved, it can cost between $5 and $10 to activate a credit freeze. You can get a credit freeze for free if you are the victim of identity theft, but you have to provide a copy of a report made to a proper authority if you want to “prove” that your identity was stolen. This often means filing a police report or filing a report with the Federal Trade Commission. You usually need to show a copy of the report before you can get a free credit freeze.

There can be additional fees related to your credit freeze. When you freeze your credit, you are issued a PIN that you can use to temporarily lift the credit freeze and apply for a loan. However, you might have to pay a fee of $5 or $10 (or more, depending on where you are and the Bureau) in order to reinstate the freeze after you have used your PIN to apply for credit. Losing your PIN and getting a new one issued also usually comes with a fee.

You should only initiate a credit freeze when you are sure that this is the course you want to pursue. A credit freeze can provide you with peace of mind, but it comes at a cost of money, time, and convenience.

Posted by: Carlson Mortgage – a St. Louis mortgage broker providing home loans in the state of Missouri. We can be reached at (314) 329-7314 seven days a week. Let us be your source for some of the lowest mortgage interest rates in St. Louis on conventional, FHA, Veterans (VA), USDA, Jumbo and condominium (condo) financing. We have 11 years of experience providing home loans and mortgage services in St. Louis that are tailored individually to your unique needs and to your financial situation. We speak English, Spanish and Russian. Call us today to inquire about home loan interest rates. to get pre-approved for a purchase or a refinance mortgage, or if you have any general mortgage questions.

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