“A few weeks ago, my sister was contacted by a debt collections agency requesting payment for a credit card that she didn’t recognize. After some digging, she found out that a fraudster opened a credit card in her name and charged thousands of dollars! Now I’m scared something like this could happen to me. What can I do?”
With fraud on the rise, there are steps you can take to protect your credit. Services like LifeLock provide credit monitoring for a monthly fee, but if you’re looking for a no-cost step to take, you can protect your reports proactively for free with a credit freeze.
What is a credit freeze?
Placing a credit freeze is a cost free way to prevent creditors from viewing your credit reporting file, which prevents fraudsters from opening a new loan in your name while the freeze is in place.
Placing a credit freeze will not affect your credit score. Your current creditors, such as your credit cards and mortgage, will still report your repayment activity to the credit bureaus. If you are applying for a new loan or line of credit, you will need to contact the credit bureaus (Experian, Equifax, TransUnion) and provide your personal PIN number to unlock your account.
For example, if you are opening a home equity loan with your bank, ask your bank which credit report they use and then unfreeze that specific credit bureau. But if you’re shopping around for the best rate, you may want to unfreeze all three credit bureaus for a specified time period (14-30 days).
Once you sign up for a credit freeze, you will start receiving credit alerts. A credit alert is sent to you via email when there has been a change to your credit activity. This could include a change in your credit score, a closed account (such as paying off a car loan), or an increased credit limit on an existing credit card.
How do I freeze my credit?
Placing a credit freeze may be a bit time consuming, as you need to contact each of the three credit bureaus individually. But keep in mind that disputing and repairing credit from identity theft can be a long process, so freezing your credit now can save you a headache in the long run. To place a credit freeze, contact the agencies below:
What information should I have available?
To freeze your credit, you will need to provide the following information:
- Date of birth
- Social Security number
In some situations, you may need to provide additional documents:
- ID, such as a passport, driver’s license, or military ID
- Proof of address, like a bank statement or utility bill
When place a credit freeze, store your PIN number in a secure location. As financial advisors, we advise our clients to check their credit reports at least annually to check for fraud at the credit bureau websites or at www.AnnualCreditReport.com. Confirm that the accounts and outstanding balances on your credit reports are actually yours. Stay alert – while freezing your credit offers a layer of protection against fraud, it doesn’t prevent all possible financial theft. If your financial accounts are compromised, check out our blog What To Do If Your Financial Accounts Have Been Hacked for steps you can take to restore secure banking and recover lost funds.
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