Laptop with Freeze on the red key by credit score report as concept for new law allowing free credit freezes with agencies. Concept: credit freeze
Derek Tallent
By: dtallent
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What is a Credit Freeze? Can It Protect Your Credit?

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If you own a small business, you should be aware of how important your credit score is. You may already have experience with checking your credit score or acquiring your credit reports

But what happens if someone tries to get your credit reports without your permission? 

When your identity gets stolen, someone could use your credit information to not only make purchases with your current accounts but open and apply for new accounts as well. This could obviously be very disastrous as you could find yourself in a huge amount of debt with more accounts than you can handle. 

That is where credit freezing comes in. 

We will be discussing what a credit freeze is and how you can do one if the need ever arises.

What is a Credit Freeze?

To start, we have to understand what a credit freeze actually is. 

When you want to get your credit score, you send in your information to one of the three main credit reporting agencies (Equifax, Transunion, and Experian) who then return a credit report from the given information. If your credit information is stolen, the thief may try and use your information to open new credit accounts in your name. 

One way to counteract this is to freeze your credit. 

What happens when you freeze your credit?

When you request a credit freeze from the credit reporting agencies, they will no longer accept requests for your credit reports. This will stop them from giving out any credit reports in your name.

When To Freeze Your Credit?

Credit freezing should not be done on a whim, you should only do it when absolutely necessary. Here are a few situations when you should consider using a credit freeze:

1. Your accounts have already been compromised

If you notice credit inquiries that you did not make or even credit card purchases that seem out of place, your accounts may have already been compromised. 

In this case, you might want to implement a credit freeze in order to prevent the thief from opening up any other accounts.

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2. You are the victim of a data breach

Unfortunately, sometimes thieves are able to secure the personal information of thousands of people from sites that store information (like social media sites, email services, banks, and more.) 

These are called data breaches.

In most cases, if a data breach happens at a company where your data is stored, you will be made aware. If so, you may want to go ahead and freeze your credit in case the thief attempts to use your credit information to open new accounts.

3. You unintentionally give away credit information

We all make mistakes, and it can be very easy to fall for a convincing phish email or misplace your credit card. 

If you realize that you unintentionally give away any of the following information that can be used for identity theft, you may consider a credit freeze: name and address, credit card or bank account numbers, social security number, medical insurance numbers, etc.

How to Freeze Your Credit?

In order to freeze your credit, you simply need to put in a request with each of the credit reporting agencies to freeze your credit account. You will need to provide your name, address, birth date, and social security number. 

The credit agency will then ask you questions to verify your identity and provide you with a PIN that you can use when you want to unfreeze your credit account. 

You simply have to request to unfreeze your credit (either temporarily or permanently) with the credit agency using the PIN that you were provided. 

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Below are the phone numbers and websites for each of the credit agencies you will need to contact in order to freeze your credit:

Experian

Website: https://www.experian.com/freeze/center.html

Phone Number: 1-888-397-3742

Transunion

Website: https://www.transunion.com/credit-freeze

Phone Number: 888-909-8872

Equifax

Website: https://help.equifax.com/s/article/How-do-I-place-temporarily-lift-or-permanently-remove-a-security-freeze

Phone Number: 800-349-9960

Pros and Cons of Freezing Your Credit

Freezing your credit is sometimes necessary, but you still need to know what you are getting into. Here are some of the pros and cons of freezing your credit:

Advantages of freezing your credit:

  • As of September 2018, credit freezes are completely free. It also does not cost anything to lift your freeze.
  • It stops identity thieves from opening accounts in your name.
  • Due to new laws, all credit agencies must make the credit freezing process as simple as possible. That is why each credit agency has helplines and web pages to make it easy for consumers to request a credit freeze.
  • Credit agencies are allowed to share your information with certain groups (namely those offering credit cards). They will often sell your data so that these companies can start sending you emails and offers for their cards. A credit freeze prevents the credit agency from doing this.

Disadvantages of freezing your credit:

  • You will need to remember your PIN every time you want to lift the freeze. Equifax and Transunion allow you to answer questions to verify your identity, but Experian will only lift the freeze if you provide your PIN.
  • You will need to request a freeze from every credit agency, and also request a lift to the freeze from each one. This takes a bit of effort on your part, especially if you only want to lift the freeze temporarily. 
  • It is important to remember that a credit freeze only protects against thieves trying to open new credit accounts. They can still use current accounts to make purchases, so you will need to contact your bank or whoever handles your credit cards to make sure that those cards are frozen as well.

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Protect Your Credit

You will hopefully not need to implement a credit freeze anytime soon, but you should now be more comfortable in requesting a credit freeze if it ever becomes necessary. Remember that it is very important to protect your credit and do everything you can to maintain a good credit score.

Why do you need a good credit score?
A good credit score does magic. It represents how reliable you are when it comes to borrowing money and how well, or poorly, you manage your debt. So here’s the deal: it’s imperative, especially for potential business owners, to have a good credit score.

For more helpful articles and guidance, be sure to join our Camino Financial Newsletter. We always strive to fulfill our motto: “No Business Left Behind”, and a big part of that is creating a community of small business owners and using our newsletter to give them weekly updates on the changing world of small businesses and offer tips to help their business succeed.

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