The Basics of a Credit Freeze

A credit freeze helps prevent consumer identity theft and credit fraud. A credit freeze is either permanent or temporary and the fees for a credit freeze can vary by state. Identity theft occurs when someone uses another person's identity through his personal information. This includes the use of a driver's license number, social security number, address and other unique personal information.

Identity Theft and Credit Fraud

Knowingly using another person's credit information, with the intent to defraud and obtain something of value is credit fraud. Examples of credit fraud include the unauthorized use of a person's credit card, the creation of counterfeit credit instruments and the use of personal information to open or apply for credit or loans. The Identity Theft and Assumption Deterrence Act of 1998 and the United States Code made identity theft and credit fraud a federal crime. Persons found guilty of first offenses may be subject to a fine and incarcerated for fifteen years. Individual state laws may also apply concerning identity theft and credit fraud penalties.

Credit Freeze

Credit freeze laws vary by state. The basic function, however, is the same. A credit freeze allows a consumer to "freeze" or hold his credit file so that potential creditors cannot access the information. Instead, they will receive an error message showing the account has a credit freeze in place. This helps prevent identity and credit thieves from opening new accounts in a consumer's name. Credit freezes typically do not apply to parties that you have an existing relationship with. Current creditors, banks, utility companies, contract service providers (such as cell phone companies) and other parties may still access your credit profile. Companies can still send pre-screened offers for credit. These are typically in the form of credit card offers received in the mail.

Requesting a Freeze

Contact each of the major consumer credit reporting agencies to request a credit freeze. The major consumer credit bureaus are Experian, Equifax and Trans Union. Credit freeze requests may be placed online, by phone or mail. Freezes may be temporary or permanent.

Credit freezes can be lifted for a specific creditor. This allows you to apply for credit privileges or open a credit account. Only the specified creditor will have access to your credit file. Other creditors and parties will still be denied access.

In order to process a credit freeze request, you will be required to establish a personal identification number (PIN) and a password. This is for security purposes. The fees for placing and lifting a credit freeze vary by state. In addition, identity theft victims producing a valid police report are generally not charged for the placement of a credit freeze. Citizens over the age of 65 may receive a free or discounted credit freeze.

Remember that a credit freeze will only help prevent new accounts from being opened in your name. Existing accounts and credit cards are still subject to identity theft and credit fraud.  

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