Identity theft can severely damage your credit and may take months to resolve. According to the Federal Trade Commission, fraudulent new account activity was responsible for 80% of all identity fraud reports in the second quarter of 20241. With fraud becoming more prevalent in our daily lives, it is beneficial to understand actions you can take to protect yourself against becoming a victim.
A credit freeze, also known as a security freeze, is a way to restrict access to your credit report and prevent identity theft if you suspect your credit report or personal data has been exposed.
A credit freeze blocks lenders from accessing your credit report, which can stop them from opening new accounts in your name. Other than making it slightly less convenient to apply for a loan or credit card, freezing your credit is free and has almost no drawbacks. It does not affect your credit score. Landlords and employers can still perform credit checks, and existing creditors can still increase your credit limit.
You can initiate a credit freeze online with the three major credit bureaus: Experian, TransUnion, and Equifax. To establish or lift the freeze, you will need to contact each bureau individually. You will be required to verify your identity with a government-issued ID, pay stubs, and utility bills. The entire process should take less than 30 minutes to complete.
Once in place, you must remember to unfreeze your credit files before you apply for new credit cards, loans, or buy now pay later offers.
When you freeze your credit, you may be offered a credit lock, which is a subscription service that alerts you when lenders make new inquiries. This is not necessary for most people unless your data has been recently breached or you would like extra monitoring.
Before purchasing any credit-protection product, consider the free services you might already have. Federal law mandates that companies provide two years of free credit monitoring if your data has been compromised in a major breach. Additionally, many credit card companies offer complimentary credit monitoring to their cardholders.
Be aware that a credit freeze does not prevent fraud on your existing accounts. Criminals can still steal your physical credit cards, skim your account numbers, and hijack your online accounts. Therefore, it is crucial to regularly monitor your financial accounts and credit reports for any signs of fraudulent activity.
1 Identity Theft Reports by Federal Trade Commission
Experian: www.experian.com/freeze/center.html
TransUnion: www.transunion.com/credit-freeze
Equifax: www.equifax.com/personal/credit-report-services/credit-freeze/
This material is being provided for educational and informational purposes only. D.A. Davidson & Co. is a registered broker-dealer and registered investment adviser that does not provide tax or legal advice. Information contained herein has been obtained by sources we consider reliable but is not guaranteed and we are not soliciting any action based upon it. Any opinions expressed are based on our interpretation of the data available to us at the time of the original article. These opinions are subject to change at any time without notice. Copyright D.A. Davidson & Co., 2024. All rights reserved. Member FINRA and SIPC.