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What is a Credit Freeze and How to Start?

financial planning

How do you reduce the impact of identity theft?  Are there steps you can take now that will reduce your likelihood of having your life disrupted to resolve a criminal’s mischief?  Are these solutions expensive, restrictive, or complex to configure?  Does a credit check impact my credit score?  

There are lots of news stories about identity theft in the news.  Lots of times the crime is as simple as swiping a credit card number and using it.  These cases are easily resolved as the law is on the consumers side.  You just need to review your credit card statements on a timely basis and notify the credit card company of any unauthorized charges.  

A much more devious criminal will gain access to your credit history and apply for credit using the victim’s name, address, and social security number.  If the criminal’s intent is to leverage your credit then this path has many very bad consequences.  One common method is to open a credit line at an online “Pay Day Loan” type of company.  The scam here is to get a $5000 loan using the victim’s credit info.  The victim is not aware as the mailing address and contact information have been altered.  Another, way more sinister, scam is for the criminal to purchase a home using the victim’s credit information.  These are but just a few of the many types of criminal activity.  These are common and happen frequently. 

What can you do to reduce your risk profile for identity theft?

There is a simple solution, that is now free, to reduce your risk.  The solution is simply to implement a Credit Freeze with each of the credit bureaus.  Once implemented, you will be able to still use your credit cards as you do today.  All of your accounts will still work as they did before the freeze.  What changes is that each of the Credit Agencies will not open a line of credit in your name unless you authorize it.  This authorization process involves the Agency mailing you via US Post Office a confidential “PIN” that you use to Unfreeze your credit.  

How do I setup a Credit Freeze?

The process is all online, simple, and free.  You simply need to go to each website and setup a credit freeze on your account. The agencies will attempt to sell you a service – but you don’t need that as the credit freeze is by law – free.  

  1. Experian.  Click HERE to begin freezing your credit.

  2. Transunion.  Click HERE to begin freezing your credit.

  3. Equifax.  Click HERE to begin freezing your credit.  

One important point is that you must freeze your credit with all three Credit Agencies.  


What if you want to get a new Credit Card?

Once you freeze your credit, you will need to “unfreeze” your credit to allow the Credit Agencies the ability to do a “hard credit inquiry”.  The hard-credit inquiry is needed to grant access to a new credit line.  To unfreeze your credit, you simply go online and request that Credit Agency to “thaw” your credit for 24 hours for that particular vendor.   

What is the difference between Hard vs Soft Credit Inquiry?

A hard-credit inquiry is requested by a vendor to the credit agency to determine a customer’s credit score.  The hard inquiry will be noted on your credit report.  Hard credit inquiries are typically called “Hard Pulls”.  A soft credit inquiry, also called Soft Pulls”, don’t impact your credit score and are used by vendors or others to do a background check.  

Summary

A credit freeze is an important part of your personal financial security.  It’s hard to have a well-developed financial plan and investment strategy if you are missing some key foundational areas like a credit freeze.  You might consider setting up a freeze for all family members since criminals are not above using your children or grandkids as identity theft victims.  

If you would like any assistance with cash optimization, cash flow planning, or cash management please schedule us a quick call to discuss options or fill out the form below.  




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