Criminals and cyber thieves only need a few data points, such as your name, address, Social Security number or credit card number, to steal from you. Once they have your identifying information, they could empty your bank account, rack up charges on your credit cards, get a cell phone in your name or even pretend to be you if they get arrested.
If you worry about becoming an identity theft victim, there are ways to fight back. The nationwide credit-reporting agencies – Experian, Equifax and TransUnion – give consumers several options for restricting access to their credit data, including a credit lock and credit freeze.
But understanding the differences between these protections can be confusing. Here are the main pros and cons to consider before placing a freeze or lock on your credit files.
Advantages of Having a Credit Freeze
While there's no foolproof method to stay safe from identity theft, freezing your credit is the most effective way to prevent criminals from opening new credit accounts in your name.
A credit freeze, also known as a security freeze, prevents a credit agency from releasing your information to anyone without your consent (with some exceptions) until you unfreeze your file using a personal identification number.
A credit freeze protects you because lenders insist on reviewing your credit before approving you. If no one can access your credit, that shuts down bogus requests from thieves and cybercriminals.
Freezing your credit doesn't affect your existing credit accounts or your credit scores in any way. It just makes it more difficult for an identity thief to open new accounts in your name.
While freezing and unfreezing your credit used to come with fees in many states, it's now free due to a federal law which went into effect in September 2018.
Disadvantages of Having a Credit Freeze
While a credit freeze can prevent a thief from opening a new account in your name, one downside is that certain companies can still access your credit reports. Those companies include:
- Creditors with which you already have a relationship.
- Cell phone and utility companies.
- Credit-monitoring services.
- Potential employers or landlords whom you authorize.
- Government agencies following a court order.
- Debt collection agencies.
- Companies that screen for credit and insurance offers using a soft credit inquiry, which does not affect your credit scores.
However, if you don't want to receive unsolicited prescreened offers, you can opt-out at optoutprescreen.com or by calling 1-888-5-OPT-OUT (1-888-567-8688).
Once a credit freeze is in place, you won't be able to get any type of product or service that requires a legitimate review of your credit, such as a loan, insurance or professional licenses, without unfreezing it ahead of time.
Also, to be fully protected, you must place a freeze on your report at each of the three nationwide agencies: Experian, Equifax and TransUnion. In order to thaw out your credit, you'll also need to visit each agency website and have each of your PINs handy, which is a bit of a hassle. Lifting a freeze online shouldn't take more than an hour or two.
But if you lose your PINs, or the credit agencies can't verify your identity based on the information you provide, unfreezing your file can take much longer. The credit agencies may require you to mail in supporting documentation, such as a copy of your driver's license or utility bills, before they make changes to your credit files.
Advantages of Having a Credit Lock
Like a credit freeze, a credit lock doesn't hurt your credit. It restricts access to your credit files so no one, including you, can open a new credit account before unlocking them. You'll also need to place locks with each of the three credit-reporting agencies for full protection.
But unlike with a freeze, you don't need PINs to unlock your credit files, so it's much more convenient. You can even create a lock or unlock using a smartphone app. Plus, there typically is no waiting period for a lock or unlock to take effect.
Disadvantages of Having a Credit Lock
The major downside to having a credit lock is that it generally comes with a fee. Plus, your credit file can still be accessed for the same reasons as a freeze.
Credit agencies charge about $20 per month to maintain your lock service, which may include daily alerts, dark web monitoring and free credit reports. However, Equifax offers a free credit lock in the wake of its massive data breach that occurred in 2017.
The price and rules for locks can change over time because they're products created by credit agencies. In contrast, the rules for a credit freeze have been established by federal law.
If you don't want the cost of a credit lock or the hassle of a freeze, there's a third protection option that won't harm your credit. It's called a fraud alert. An alert tells creditors that they need to take extra steps to verify your identity before approving you for a new credit account.
Alerts used to expire after 90 days (unless renewed), but the new law extends them for one year. And if you've been an identity theft victim, you can extend them for seven years.
In addition to being free, another benefit of a fraud alert is that you only need to contact one credit agency because they must notify the other two on your behalf, so alerts can also be placed on those files. Plus, the agencies remove your name from their prescreened offers lists. That means you'll stop receiving preapproved offers from lenders, credit cards and insurance companies while a fraud alert is active.
The downside to placing a fraud alert is that it slows down the application process when you do need credit. However, if your personal information has been breached, having this delay is worth the inconvenience.
Which type of credit protection is best for you depends on your finances. If you know or suspect that you're a victim of identity theft, you should take the most defensive approach and freeze your credit.
But for most people, your best defense against identity theft is simple: Carefully monitor your credit reports and account statements for any unauthorized activity, including: