Credit Freeze Defined: How to Protect, Freeze & Unfreeze Your Credit

Define Credit Freeze

Why would you want to do a credit freeze? Well, unless you’ve been living under a rock, you are probably aware that Equifax dropped the ball in terms of leaking consumer data last year. In fact, many experts now say that the Equifax data breach that took place on July 29th, 2017 may have impacted as many as 143 million consumers in the U.S.

The internet is full of helpful information about this incident, but there are two things I really want you to know when it comes to how to protect your credit. First off, Equifax is unpredictable and so is their website. Second, you have a few options when it comes to how to protect your credit moving forward.

1. THE EQUIFAX WEBSITE IS…UNPREDICTABLE

You might have seen the eligibility website released by Equifax. If not, you can access it here. In return for your last name and last 6 digits of your SSN, it allegedly tells you if you’ve been impacted by the recent breach.

Unfortunately, it doesn’t appear to be perfect. The person in the tweet below entered “Test” and “123456” and it told him he may have been impacted and prompted him to enroll in their monitoring service:


Predictably, I gave it a try using a few random combinations and got the same result. While this is unfortunate, it is not the end of the world. Why? Because it shows that you’re really on your own when it comes to monitoring your credit.

2. MONITOR YOUR CREDIT

That’s right; if you want to protect your credit, you should really take the time to monitor it yourself. That’s why, if you have not yet frozen your credit yet, you should consider signing up for Credit Karma.

Credit Karma is a free credit monitoring service that allows you to view your credit score and access your credit report for free in exchange for being solicited for new credit card offers and sharing your information. Remember, Credit Karma is just a service to monitor your credit. Using Credit Karma isn’t the same as a credit freeze. It’s not critical to sign up for Credit Karma if you don’t feel comfortable, but it’s a free step you can take if you’re worried about the data breach.

When reviewing your credit report, be sure to notice if any companies look unfamiliar to you. If so, it may be identity theft.

3. CREDIT FREEZE

Given how pervasive ID theft and data breaches are nowadays, one could make the case that your credit should always be frozen.

Consumer expert Clark Howard likes to equate a credit freeze with putting a lock on your front door and a credit monitoring service with installing an alarm system. With a credit freeze, you are preventing people from impersonating you. It is a preventative measure and one of the easiest ways to protect yourself against identity theft.

With credit monitoring, you get to learn about how someone has broken into your house after the fact. That is, you are notified after someone has already broken into your house and stolen your belongings, but not early enough to prevent any loss. Despite what companies like LifeLock would have you believe, credit monitoring is arguably a worthless service – and certainly not worth paying for!

Once you have signed up for free credit monitoring, follow this link to learn more about freezing your credit and how to easily do it with all three bureaus: http://clark.com/personal-finance-credit/credit-freeze-and-thaw-guide/.

There is only one way to do a credit freeze – and that is directly via the credit reporting agencies. In order to do so, you will have to supply your Social Security information to the credit reporting agencies. While giving out your Social Security number may feel nerve-racking, you must supply your Social Security number to the credit reporting agencies in order to freeze your credit.

Of course, there is always the possibility that any of the other credit reporting agencies get hacked – or that Credit Karma could get hacked. The potential fallout is that your information could be exposed. This is all the more reason you need to do a credit freeze.

Keep Your PIN in a Safe Place

When you do a credit freeze, you will be issued a personal identification number (PIN). Alternatively, you can choose your own PIN. It varies by agency. You want to keep these PINs in a safe place – and avoid sharing them with anyone. If you lose your PINs, it can be a big hassle to unfreeze your credit.

Unfreezing Your Credit

Let’s say you’ve signed up for free credit monitoring at Credit Karma and you did a credit freeze with all three credit reporting agencies:

  • Equifax
  • TransUnion
  • Experian

Good job! At some point, however, it’s fairly likely you’ll need to unfreeze your credit because you need someone to run a credit report on you. There are a few reasons this issue may come up:

  • Applying for a new line of credit, such as a credit card or mortgage loan or refinance
  • Applying for a job or apartment rental

If you know that you’ll need your credit run, do not unfreeze your credit with any of the agencies just yet. Why? Because, most of the time, someone running your credit will only run it with one agency. Since only one agency will report on your credit, you don’t want to unfreeze your credit with all three agencies. There are a few reasons why this is the case:

It May Cost Up to $10 per Credit Reporting Agency to Unfreeze Your Credit

Depending upon your state, it can cost up to $10 to issue a credit freeze, permanent unfreeze, or temporary unfreeze. Unfreezing your credit across all three credit reporting agencies could require you to spend at least $30 for no reason at all.

It Takes a Few Minutes to Unfreeze Your Credit

While it may only take a couple minutes to unfreeze your credit, that’s time you didn’t need to waste if no one is checking your credit against all three agencies.

Having Thawed Credit Increases Your Risk of I.D. Theft

You did a credit freeze to protect you against I.D. theft. So, there’s no point in increasing your vulnerability if you only need your credit checked against one agency and not all three.

The Best Way to Thaw Your Credit to Protect Yourself from I.D. Theft

Usually, it may make the most sense to simply have the entity pulling your credit report do so without even mentioning your credit freeze during the process. This is especially the case for credit card companies. The reason is that most company representatives pulling a credit report have absolutely no idea which agency they are running your credit report with. The company pulling your credit report will only actually know which entity is running your credit after they are unable to run your credit. At that point, the creditor will circle back to you to inform you that your credit is frozen – and that in order to process your application, you will need to unfreeze your credit with credit reporting agency X.

Once you know which agency they are pulling your credit report from, you can unfreeze your credit with the appropriate credit reporting firm. The good news is, unfreezing your credit only take a few minutes. It can also be done online, and it is nearly instant. The moment you make the final mouse click to unfreeze your credit, the creditor is able to re-run a credit inquiry and get the results they need. There is literally no time between you unfreezing your credit and your credit being available for an inquiry.

Do a Global Lift when Unfreezing Your Credit

When unfreezing your credit, you will be given two options:

  • Unfreeze your credit for everyone
  • Unfreeze your credit for just one person/entity

While the second option is way more secure, most entities pulling credit reports can’t seem to figure this out. Unfortunately, this typically means you will have to make your credit accessible for everyone when unfreezing your credit. Depending upon the credit reporting agency that you are unfreezing your credit with, this may be called a “Global Lift” or “Universal Lift.” Of course, you can limit your risk to ID theft by using a global lift but by opting for a temporary lift of just one day.

Step-by-Step Instructions for Applying for a Credit Card with Frozen Credit

Let’s use all of the above to illustrate the steps for applying for a new credit card with frozen credit. The process for applying for credit when you have a credit freeze already in place looks like this:

  • Apply for a new credit card (usually online)
  • Receive an automated message that your application is being processed

With unfrozen credit, you normally receive instant qualification (assuming a good credit history) when you apply for a new credit card. With your credit frozen, you will receive a boilerplate response that your application is being processed. From that point, you will:

  • Receive a letter (usually via snail mail) that your application cannot be processed because your credit is frozen with credit reporting agency X
  • Unfreeze your credit (doing a global lift) with the credit issuer on the phone

Contact the credit issuer via the phone number provided in the letter you received in the mail. Log onto credit reporting agency X website and unfreeze your credit with the credit card issuer on the phone.

Normally, the process of having the credit issuer re-run your credit can be pretty simple. At least, this is the case for credit issuers like Chase and Citi. Speaking from previous experience, those credit card issuers can pull your credit instantly and approve you for your new credit card over the phone. However, that is not the case with every credit issuer. Wells Fargo, for example, cannot instantly reprocess a credit application and run your credit. It can take Wells Fargo up to two business days.

How to Protect Your Credit

Here is a recap on how to protect your credit given that security breaches are all too common:

  1. Sign up for free credit monitoring service like Credit Karma
  2. Do a credit freeze
  3. Monitor your credit report for free using Credit Karma

This may seem overly complex, but it’s totally worth it to make sure your credit is protected at all times. When it comes to identity theft, an ounce of prevention is worth a pound of cure.