What is freezing credit and how does it protect against identity theft?

Identity theft can have consequences ranging from the unauthorized opening of credit cards and loans to difficulties accessing financing or regaining control of affected accounts.

In a context of increasingly frequent data breaches, protecting personal information has become a concern for millions of people in the United States.

One of the tools available to reduce that risk is freezing credit (credit freezeThis is a free measure that prevents lenders and card issuers from consulting the credit history to open new accounts without consumer authorization.

But although it's one of the most effective ways to prevent this type of fraud, many people are unaware that it exists. Or, they don't know how and when to use it.

What does freezing credit mean?

Freezing credit does not mean blocking credit cards or preventing a person from using their accounts. It also does not affect their credit score or existing loans.

What it does is block access to your credit history when a bank, credit union, or any other financial institution tries to review it to approve a new card or loan.

“It blocks access to your credit report and serves as a proactive measure against identity theft,” he explained to Enlace Latino NC Gizelle Herrera, financial and housing advisor of OnTrack WNC, a non-profit organization that offers financial education and advice.

If someone tries to open a new line of credit using stolen information, the financial institution will be unable to access their credit history while the credit remains frozen. In many cases, this prevents the application from moving forward.

Who should consider freezing their credit?

There is no single answer. The decision depends on each person's situation. It also depends on whether they plan to apply for a loan, finance a car, open a new credit card, or buy a home in the near future.

La Federal Trade Commission (FTC) It notes that both credit freezes and fraud alerts can help protect against identity theft. Furthermore, it states that the most appropriate tool will depend on each consumer's individual circumstances.

For Herrera, freezing credit is an especially useful option for those who do not plan to apply for new credit.

“If you know you're not going to be applying for loans “For credit cards, it’s best to freeze it,” he said. If you later need to finance a purchase or open a new account, you can unfreeze the credit for the time it takes for the financial institution to review your credit history and, once the process is complete, freeze it again.

Herrera adds that this measure can also be useful for those focused on achieving a financial goal, such as paying off debts and avoiding new obligations. In those cases, keeping credit frozen can become an additional barrier before opening a new line of credit.

What happens if you later need a loan or a new card?

One of the most frequent questions is whether freezing credit prevents you from applying for financing in the future. The answer is no.

If you need to buy a car later on, apply for a mortgage or open a new credit card, you can temporarily unfreeze your credit history so the financial institution can review it.

Herrera explains that the consumer can choose how long to keep the credit unfrozen so the bank can process the application. Once that period ends, the freeze is automatically reactivated.

Can I check my credit score if my credit is frozen?

Another common concern is whether freezing credit also makes it impossible to access credit history or credit score. Rebecca Strimer, CEO of OnTrack WNC, explained to Enlace Latino NC that consumers can continue to review that information through the tools offered by some banks and other services.

What cannot be done while the credit remains frozen is the consultation that lenders carry out when a person requests a new line of credit.

The freeze does not affect existing accounts. Current credit cards and loans continue to function normally, and freezing your credit history does not change your credit score. The measure only restricts access to your credit history when a financial institution needs to review it to approve a new loan application.

What does a credit freeze protect and what does it not protect?

A credit freeze is designed to protect against a specific type of fraud. It protects you if someone else uses stolen information to open a new credit card, apply for a loan, or create a new line of credit in your name.

It doesn't prevent all types of identity theft. If someone already has the details of an existing card, for example, freezing it doesn't stop them from trying to use that account. Nor does it replace regularly reviewing bank statements, credit reports, or other banking activity.

Therefore, freezing accounts should be understood as a preventative measure, not a complete solution. It makes it harder for someone to open new accounts with stolen information, but it doesn't eliminate the need to regularly review credit and financial accounts.

How is credit frozen?

To freeze the credit, the person must contact the three main banks separately. US credit agencies: Equifax, Experian and TransUnion.

Herrera recommends having the following basic information on hand before starting the process: full name, Social Security number, date of birth, current address, previous addresses, and phone number. With this information, the freeze can be requested online or by phone from any of the three agencies. The process is free.

What other measures help protect identity?

One of the most important steps is to request and review your credit report at least once a year. The goal is to confirm that all the accounts listed are legitimate.

“It’s easier to fix mistakes if they’re caught as soon as they happen,” Herrera said, regarding the importance of checking your credit report. If an unknown account remains on the report for years, it can be more difficult to correct the problem and reverse the damage.

Reviewing a credit report can detect warning signs, such as accounts the person did not open, loans they do not recognize, or incorrect personal information.

Helpful Resources

To freeze the credit:

The process must be completed separately with Equifax, Experian, and TransUnion. The FTC has a guide comparing credit freezes with fraud alerts to help consumers decide which option is appropriate for their situation.

To check your credit report:

AnnualCreditReport.com It allows you to request free reports from the three major credit bureaus. Reviewing them regularly helps detect unknown accounts or errors that could affect your credit history.

To report identity theft:

IdentityTheft.gov It allows you to file a report with the FTC and receive a personalized recovery plan.

Local resource in Asheville:

OnTrack WNC offers a Credit Awareness Day Every second Thursday of the month, from 12:00 pm to 2:00 pm, at 50 S. French Broad Ave., Suite 222, Asheville. The organization offers a free FICO report with information from Experian, Equifax, and TransUnion, as well as a brief session with a certified financial counselor. No appointment is necessary, and the review will not affect your credit score.