Money Tip of the Day: Good Places to Freeze (Your Credit)
One of the more interesting and almost unnoticed developments in privacy and identity protection is the “credit freeze.” It’s currently available in California (link is to CA’s Office of Privacy Protection explanation page) and Texas, and will be in place in Louisiana, and Vermont in July. Texas and Vermont limit or will limit freezes to victims of identity theft.
What is a credit freeze? It’s a blanket prohibition on access to your credit file by anyone besides you. You can still get your own credit report for the purpose of reviewing them.
Why you might consider it:
- - It’s a great weapon against ID theft. A thief who steals your info won’t be able to get credit or open accounts in your name. It’s not the be-all-end-all, but it’s clearly very powerful.
- - If you never, or very rarely, apply for credit, services requiring a credit check, or employment. You would be a good candidate for a freeze if you are in a paid-off house or have a mortgage with a very low rate, pay cash for your cars, have 1-2 credit cards you seldom use, aren’t shopping for insurance or other services that generate an inquiry, and don’t expect to be in the job market for some time. Even though that seems like a long list of qualifiers, millions of Americans would fit this description.
- - (Don’t take this wrong) To control yourself. In other words, you know that you’ll be tempted by credit offers, so rather than risk giving in, you freeze your credit. This would also seem to be a good idea for a parent to consider for a teenager who is just learning the financial ropes.
Fightidentitytheft.com has the lowdown and FAQs on the California freeze, including link pages to the specific procedures required by each credit bureau to put a freeze in place, and to temporarily unfreeze your file with a PIN number.
Here are starting-point links for the other states:
- - Texas
- - Vermont
In general, the costs per credit bureau is $8-$10 for a freeze and $8-$10 for an unfreeze, but freezing is free for victims of ID theft who provide a police report as proof.
The credit bureaus and the financial services industry ABSOLUTELY DESPISE credit freezes. The bureaus complain that it’s very inconvenient for them to have to flag files, that fraud alerts (where you have to be contacted before a credit inquiry can be completed) provide sufficient protection, and that it restricts their potential income from credit inquiries. Lenders and other gripe that it slows down the loan process when they have applicants who have to temporarily unfreeze their files to complete an application. Freeze opponents also claim that consumers don’t want it–As of last summer, only 2,000 Californians and 150 Texans have taken advantage of the freeze, according to Experian.
My response: Too bad, so sad, guys. I don’t see anything better for fighting ID theft, especially because many of the best freeze candidates are those who would be unlikely to detect an ID theft in progress until several months, or even years, have passed.
Usage of the freeze option is low simply because the credit bureaus don’t publicize it. Here’s hoping the freeze gains momentum in more states. One of the things to watch for in the current privacy/ID theft debate in Washington is that by nationalizing laws in this area, Congress might take the freeze opportunity away from the states–a VERY bad move. I would go in the opposite direction–at a minimum, a freeze should be available to any victim of identity theft in any state; then let each state decide whether it should be an option available to everyone else.
If you think a freeze is a good idea, lobby in your state for one, and encourage Congress not to close off the opportunity with national legislation.
