New Law Allows for Free Credit Freezing

By LRG Wealth Advisors on September 21, 2018

Turn on the television or radio or pick up a magazine or newspaper and you will see, hear, or read an advertisement promising to protect your identity and your credit from identity thieves on the “dark web.” Experts recommend freezing your credit files with the major credit agencies as a necessary step to foil identity thieves. Beginning September 21, 2018, Congress will implement a law that allows users to freeze and unfreeze their credit at their own discretion at no charge.

These security freezes, often called credit freezes, are the most effective way to prevent criminals from using your personal information to open new accounts in your name. A credit freeze allows you to block anyone from checking your credit information. Credit bureaus store records of your accounts and payment history, which lenders use to make decisions on your creditworthiness. Freezing your credit file prevents the credit agencies from providing information to lenders unless you “thaw” the freeze first, using a special personal identification number. This makes it nearly impossible for impostors to open a line of credit in your name. The credit bureaus will notify if and/or when someone attempts to open a line of credit using your information.

Free credit freezes will be implemented as part of broader financial legislation signed in May by President Trump. Prior to this law, it could cost anywhere from $10 to $20 to freeze your credit at one agency, and for the freeze to be effective, you’d have to perform it at all three major credit bureaus (Equifax, Experian, and TransUnion). Proponents of the law believe that making credit freezes free will get rid of a financial barrier which will spur more consumers to use them. Since identity theft and cyber hackings are becoming more prevalent, the ability to freeze credit whenever you want is vital.

To be effective, credit freezes must be placed at all three major credit bureaus. Consumers must place freezes separately at all three credit bureaus and keep track of three personal identification numbers (PINs). They also must lift the freezes at all three bureaus when they want to apply for new credit. In the future, apps for Apple IOS and Android devices should make this process more streamlined. The Federal Trade Commission says that when the law takes effect, its identity theft website will provide links to each bureau’s freeze website.

The new law also allows parents to create and freeze credit files for their children under the age of 16 to prevent their identities from being misused. This is important because children’s information isn’t as closely monitored, making them even more susceptible to identity theft and hackings. The Federal Trade Commission offers information on what to do if your child’s information falls into the wrong hands.

Unfortunately, credit freezes will not protect you from other types of fraud, like someone using your credit card number or impersonating you online to claim your Social Security benefits. To avoid these types of fraud, it’s best to check your credit card statements regularly for suspicious charges and set up and monitor an online Social Security account to prevent criminals from opening one first and diverting your benefit checks. The U.S. Public Interest Research Group Study (PIRG) has other useful steps as well. U.S. PIRG also recommends freezing your file at a lesser-known reporting agency known as the National Consumer Telecom and Utilities Exchange. The exchange provides credit information to some cellphone, pay television and utility companies. There is no cost for a freeze at this agency.

Below are the links to the three major credit bureaus:

TransUnion: https://www.transunion.com/credit-freeze
Experian: https://www.experian.com/freeze/center.html
Equifax: https://www.equifax.com/personal/credit-report-services/

Sources: Federal Trade Commission, The New York Times, USA Today, MarketWatch, U.S. PIRG Education Fund