Placing a credit freeze (also known as a security freeze) is an easy way to protect against fraudulent new account openings. It’s one of the standard pieces of advice I give every client I work with. It’s free to do and there’s little downside except for a little hassle with passwords. If you ever need to open up a new line of credit or account, you can always remove the freeze or temporarily lift it.
My Story
Many years ago now someone tried to open up a Verizon phone account in my name. A photo ID is required, which means this person must have used a fake ID just to open a measly $150 phone line! My credit score took a precipitous dip even by the time I found out, but luckily I monitor my accounts regularly. I spotted it soon after the transaction. And since the purchase was made several counties away, the companies resolved it in short order. But it could have been much worse. All this could have been prevented with a credit freeze since I had no need for a new line of credit or new account at the time. Here’s how:
Implementing a Credit Freeze
Just go to each credit reporting agency (Equifax, Experian, and Transunion), set up an account login and PIN, and set a credit freeze. The annoying part is the time it takes to create the accounts and note down passwords and PINs for each adult family member at each agency.
Be very careful to securely save your login and PIN information because it’s necessary if you ever need to lift your freeze in the future.
Credit Freeze vs. Fraud Alert
Unlike fraud alerts, which you can also set, credit freezes last forever unless you lift them. Standard fraud alerts only last one year. Credit freezes offer better protection too. Going back to my story, if I had had a fraud alert set, something would have come up on the retailer’s computer screen. But I’d have to rely on the salesperson noticing it and following store policy. Whereas with a credit freeze, in most cases they physically wouldn’t have been able to open the account at all.
What If You Need to Open an Account or Line of Credit Later?
As long as you remember you set a credit freeze and saved your login information securely, it’s as simple as logging into each credit report agency account and setting a temporarily lift (say for 30 days or whatever time you need to open your new account). Then you don’t have to remember to reset the freeze. It comes back into place after the lift expires.
What Doesn't a Credit Freeze Protect Against?
A credit freeze will stop new account openings, which is important. But it does nothing to prevent fraud attempts on your existing accounts and assets. Vigilance, credit monitoring, regularly checking your transactions and balances, and having a clear picture of your total net worth (at any given moment and over time) are still necessary.
All my ongoing planning clients have access to a Client Portal where they can see a tracking of their net worth, including all investment accounts and major assets, in real-time. And I receive alerts about large transactions so I have notice to reach out to you if I see something suspicious like a large withdrawal we hadn’t discussed. So clients have a second or third line of defense in my monitoring of their financial picture.
For Deceased Family Members or Minors
You can’t set credit freezes for those who have passed, but you should set the status as DECEASED at each credit reporting agency to help prevent identity theft.
For minors, it’s possible to set a credit freeze, but it requires mailing in guardian information (including copies of Social Security cards) to each credit agency. It’s probably not necessary in most cases given the effort and exposure of information required.
Preventing Fraud
While setting a credit freeze is usually a task my clients and I get to once higher-priority critical issues are addressed, it’s a fairly simple and free thing to do. It can help protect your finances and credit for future use. Making this recommendation is just one of the many financial fraud prevention and financial emergency tips I share with clients. If you have any questions about this particular topic or any other suggestions I’ve made, don’t hesitate to contact me, details below! I offer free consultations.
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