Freezing Your Credit is Now Free

You may have been one of the 148 million people whose credit data was breached at Equifax last year. Thanks to new legislation effective as of September 21, credit agencies must allow you to freeze and unfreeze your credit free of charge.

Your credit report, which contains personal information about you and your credit history, is used by companies to gauge your creditworthiness when you apply for a credit account with them. When you freeze your credit, you prevent any new creditors from accessing your credit report. Since pulling your credit report is almost always the first step to giving you a new credit account (think credit card, personal loan, car loan, etc) it’s almost impossible to open new credit accounts in your name while your credit is frozen. This helps protect you from identity theft (specifically credit accounts fraudulently opened in your name) but it also means that you’ll need to think ahead and unfreeze your credit (at all three agencies) before you apply for any new credit of your own. Inconvenient? Maybe, but the flip side of dealing with identity theft would be worse.

The new legislation also extended fraud alerts from 90 days to one year. A credit fraud alert is a notice or “red flag” added to your credit report to notify creditors that your data may have been compromised and they need to contact you before extending new credit in your name. Are they as effective as a credit freeze? No, they don’t restrict access to your credit report and rely on companies to follow through with confirmation. But they take minimal effort to set up, have very little downside, and could prevent someone from opening up new credit in your name.

For more information, you can read the full press release from the Federal Trade Commission here.

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