Monday, March 16, 2009

Freezing Your Credit Reports - Why And How?

Freezing Reports
Everyone has three credit reports. Freezing your reports means exactly that. New accounts cannot be opened based on frozen reports. If all three reports are frozen, no one will be able to open a new account in your name until you unfreeze your reports.

Reasons To Freeze One Or More Of Your Reports:
1) It's the best protection against identity theft. If you're not planning on opening an account that requires a credit check in the near future (think: credit card, mortgage, cell phone plan etc.), or if you're going abroad for a year and are worried about identity theft, it's a good idea to freeze all three reports. The only issue with freezing, aside from the cost, is that depending on the state and agency, it may take a few days to unfreeze. If all three reports are frozen, you can't get instant credit. For example, you can't apply for a card in a store.

2) If your Fico score is lower on one of your three credit reports (because of something negative or too many inquiries). Freezing that report can help you when applying for new credit. The credit card company won't be able to check that report. If the company tries to make their inquiry using the frozen report, they will either decline your application (because they can't access your report), or they will just try to make an inquiry at one of the other two reporting agencies. Even if you are declined, it won't affect your credit, as you won't get an inquiry on a frozen report.

3) If you are applying for a bank account or for a credit line increase on a credit card but don't want it if it comes with an inquiry.

4) Now that you cannot get your Experian Fico score, some people want to freeze their Experian report because they have no way of knowing their Experian Fico score. (Besides, Experian is the only report where inquiries definitely cannot be bumped off. But bumping inquiries is another subject, which will be tackled in another post.)

No Effect On Credit Score
Placing a credit freeze has no effect on your credit score. Also, even with a credit freeze, your current credit cards will have access to your reports. You also won't have a problem getting your own credit reports and scores.

How To Freeze Your Reports And Costs:
Freezing and unfreezing credit reports can generally be done online. Every state has different fees, so check the details for your state.

Transunion - Free for all states if done online. More info on freezing.
Experian - click here to see state specific details.
Equifax - click here to see state specific details. More info on freezing.

If you were a victim of identity theft, it's free to freeze and unfreeze as often as you wish with all three agencies, in most states. You may need to send proof in the mail though.

Costs For New York:
Transunion is free to freeze and unfreeze.
Experian and Equifax are free to freeze the first time. Subsequent unfreezes and freezes cost about $5 each, and can be done online.

Unfreezing Your Reports
Whenever you want to apply for credit and you want that company to be able to check the frozen report, you can either temporarily unfreeze it, or permanently unfreeze it.
When you freeze your report, you pick a pin number. You will need to remember you pin number when you want to unfreeze your report/s.

Freezing vs. Fraud Alert:
Freezing one report does NOT automatically freeze the other reports. Only a Fraud Alert on one report should automatically alert the other two. A credit freeze is better than a fraud alert for blocking identity theft. A Fraud Alert is a note placed on your report warning new companies to verify your identity, but there is no guarantee that a company will read and follow through with that note. Fraud alerts are generally free though.

Important: Even with a credit freeze you are not 100% immune from identity theft. Some accounts may be able to be opened, such as some phone lines and bank accounts which don't require a credit check. But a credit freeze is probably the best prevention there is for identity theft.

And on the lighter side...
Freezing Your Credit Card
Take your credit card and freeze it in a block of ice. Like that you will have to think a while before actually spending anything...


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