A new federal law is soon to come into play that says credit freezes will be available fee-free for everybody. After the data breaches of last year that compromised valuable information like Social Security Numbers for nearly half of Americans, the new law is intended to encourage Americans to be safer about their credit.
How a freeze works
A security freeze makes it harder for criminals to use stolen information to open fraudulent accounts in your name or to borrow money. If you freeze your account, then the credit bureaus will not provide information to lenders unless you thaw the freeze first. To do so, you will use a special personal identification number. Freezes are absolutely the best way to prevent criminals from using personal information to open new credit accounts in your name.
Still, freezes aren’t popular
A recent AARP survey of 2,000 adults found that only 14 percent have frozen their credit files. Many suffer from optimism bias that makes people believe they are personally safe from fraud that they have learned of even when they are not. In other words, people underestimate their own risks. Others assume that, because they do not have much wealth, they would be overlooked by criminals — but this is not generally how identity thieves tend to operate. Making freezes free is an attempt at getting more consumers to use freezes as a tool to protect themselves.
In order to freeze your accounts, it is necessary to put freezes on all three major credit bureaus. In this way, you will have to keep track of three separate security pins from each bureau. Because it is hard to know in advance which credit bureau a lender will use, consumers also have to thaw all three bureaus when they want to apply for new credit lines. One credit bureau, TransUnion, has opened a new smartphone app that hopes to make credit freezes and thaws easier and more convenient.
Freezes are worth it. They may be a hassle, but they are, ultimately, the best way to prevent identity theft. However, if a freeze is too much of a hassle, you can take slightly less protective measures (but still they are better than nothing) such as a fraud alert. You can get credit bureaus to contact you to verify your identity when a company requests your credit file. And unlike a freeze, an alert placed at one bureau is automatically placed at all three. It is also a wise move just to check your credit score regularly. But, again, freezing your credit is by far your best bet to ensure that your personal information remains safe and sound.
* A freeze, however, will not prevent identity thieves from using a credit card number that you already have or impersonating you online to claim your Social Security benefits. To prevent those types of theft, it is important to check your bank statements regularly and to set up and monitor an online Social Security account.
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