Home Money Freezing Your Credit Reports — When Is the Right Time?

Freezing Your Credit Reports — When Is the Right Time?

by Chris Poindexter

If you’re getting older and don’t use credit much, or if you’re just one of those pay-as-you-go types who believes in paying cash, you may want to consider freezing your credit reports.

While freezing your credit reports is not a foolproof solution to identity theft, it does cut down on the ability of strangers to open new credit in your name. While you might think credit reports should be frozen by default, the Big Three credit reporting agencies actually fought the entire concept of security freezes tooth and claw. After losing the battle in state legislatures around the country, they finally caved — but that doesn’t mean they like it, or make it easy to opt out of the debt economy. For companies in the business of debt, people who pay cash are no fun at all. Auto dealers, department stores and big box retailers all want to be able to give you credit right on the spot — because they know if you want to keep people on the hook, the best way is to loan them money.

When Is the Right Time to Freeze Your Credit?

All the Big Three credit reporting agencies will generously allow you to freeze your credit reports for free after you’ve become the victim of identity theft; but the time you want to stop someone from opening credit in your name is before that happens. Since there’s a fee for adding and lifting credit freezes, you’ll want to wait for a time in your life when you will seldom need new credit, like auto loans, credit cards, or a mortgage. Considering that the average American applies for a mortgage once every seven years on average, and an auto loan every three-to-five years, $10 to lift a credit freeze does not seem like a terribly steep price to pay to avoid the potential legal entanglements of identity theft. Keeping a credit freeze in place for three years is cheaper than credit monitoring over the same length of time.

The Freeze Process

Putting a freeze on your credit reports means contacting each of the big Big Three reporting agencies individually, and sending them all similar but slightly different information. Equifax, Experian, and TransUnion all have similar processes to follow, that involve mailing them a variety of personal information. The fee varies from state to state, along with the length of time the freeze is in place. For some states the freeze is permanent until you lift it; others only last seven years, and then you have to go through the whole process all over again.

Gaps In the System

While a security freeze is still better than any credit monitoring service for preventing identity theft, the process is not bulletproof. Some lenders can skirt the Big Three credit agencies by using local and regional credit agencies that many people don’t even realize exist. Federal laws regarding credit management are fraught with loopholes and exceptions, and enforcement is basically a dead hand on the tiller. Nearly a quarter of the complaints received at the FTC involve mistakes on consumer credit reports and the difficulty of getting them fixed — and half of those were complaints that the credit agencies would not fix mistakes. While the credit industry whines that their error rates is a measly 1%, if a similar percentage of cars failed every year we’d turn the auto industry on its head. The frustrating part for many is that the consumer does not get the benefit of the doubt when there are disputes.

You Can Still See Your Own Credit Report

Having a security freeze in place should not affect your ability to get a copy of your own credit report and, because of the lax regulatory environment, it’s still a good idea to check your credit report by getting a free copy from annualcreditreport.com. While no fix is completely safe, having your credit reports frozen is the best insurance you can buy for $10.

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