How a Credit Freeze Works

There are pluses and minuses when you block identity thieves from taking out new credit in your name.

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.

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Kimberly Lankford
Contributing Editor, Kiplinger's Personal Finance

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.