How a Credit Freeze Works

I’ve heard that freezing my credit report is a good way to protect myself against identity theft. How does it work, and is there a downside?

Freezing your credit report prevents lenders and other companies from accessing your credit report without your permission, which can help stop identity thieves from taking out new credit in your name (even if they have your Social Security number and other personal information). Companies you currently do business with are exempt from the freeze, so your bank, credit card company, auto insurer and mortgage lender can continue to check your report. You can use a PIN to thaw your report if you want to grant access to a new lender, insurer or other company. And you should still be able to access your own report without having to lift the freeze.

For full protection, you must freeze your credit record at all three credit bureaus (Equifax.com, TransUnion.com and Experian.com). In most states, you need to pay $10 to freeze your account at each bureau and another $10 to lift it -- even temporarily. The charge may be waived if you’ve been a victim of identity theft. You generally need to provide a valid police report, an investigative report or a complaint filed with a law enforcement agency with your request to qualify for a free freeze for identity-theft victims, says Maxine Sweet, of Experian.

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“Freeze laws vary by state, as to the type of inquires that are exempt, who qualifies for free service, and how much can be charged when a fee applies,” says Sweet. “However, in all cases, consumers are allowed to access their own reports.” See the IdentityTheft Resource Center’s map for details about each state’s laws.

It’s becoming easier to freeze and thaw your account than in the past. In most states, an account can be frozen or unfrozen immediately online or by phone -- you just need to know your PIN. A few states require the request to be in writing, and they typically allow three days for the request to be processed, says Sweet. Losing your PIN is not as big of a hassle as it used to be, either. People used to get frustrated when they lost their PINs and were blocked from applying for credit or a cell phone until they could write to the credit bureau and receive a new PIN, says Sweet. But now you can now request a new PIN instantly online and avoid the delays.

Sweet cautions, however, that freezing your credit report can affect more than just your ability to sign up for new credit or get a loan. “Consumers often forget that cell-phone companies, utilities, apartment rentals, some professional licenses and many other services depend on your credit references,” she says.

For more information and advice, see How to Avoid ID Theft and 10 Ways to Guard Against Identity Theft When Traveling.

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.