Why You Should Think Twice About Freezing Your Credit

The recent Equifax data breach potentially put more than 143 million Americans’ sensitive personal information like social security numbers, birth dates, driver’s license numbers and more at risk.

With such a big hit, what if your information has been compromised? The knee-jerk reaction is to freeze your credit. But is that a good idea?

Gerri Detweiler, education director for Nav.com, where business owners can check and monitor their business and personal credit for free, offers her advice, “I encourage consumers not to rush blindly into placing a credit freeze. Here's why: Cost. If you are not a victim of identity theft (a data breach victim does not automatically qualify) it may cost you to freeze and unfreeze your credit reports each time someone needs access. At $5 - $10 a pop that can add up. Equifax has extended free credit freezes for the time being but that isn't the case with all bureaus (at least not yet) and it's temporary.”

Then too, it can be a hassle. “Many people don't realize how often their credit information may be accessed outside of applying for credit. Get a new cell phone? Utility service? Satellite TV? A credit check is likely going to be involved. You don't always know which bureau companies are going to check. You have PINs or passwords to keep track of. All this can add up to a hassle factor. You may be fine with that, but do realize what you're getting into,” she says.

But what concerns her most though, is that it gives a false sense of security. “Yes, a freeze may prevent new credit accounts from being opened, though it's not foolproof, but it doesn't stop someone from phishing their way into your bank account, or protect you from medical or taxpayer id theft, for example. Your current accounts can still be compromised. This means you must remain vigilant and carefully monitor your accounts, even with a freeze in place.”

She has personal experience, “I was recently a victim of identity theft. I placed a fraud alert, not a freeze, on my credit reports. Would I ever place a freeze? Sure. But likely I would do that if I were the victim of serious identity theft, including multiple accounts opened in my name. For a data breach, I personally would not.” When you have a fraud alert, you’re notified if someone attempts to open a new account or access credit in your name.

Mark Tsipsi, CEO and founder of MOR Credit Advisors, thinks for most people, a credit freeze isn’t the best response to the Equifax breach. “I have a better chance of getting hit by a car after writing this email than having my identity stolen from the Equifax breach.  I am recommending ALL of our customers to obtain a credit monitoring service in order to be vigilant of any fraud. This way they can contact the financial institution immediately, close the account and remove the information from their report. This may take between 15-45 days”.

For who might a freeze make sense? “I would only suggest a security freeze for two types of consumers- A. Anyone in contract for a home purchase, already been pre-approved or B. Someone who has already experienced an identity theft.”

What to Do?

Though a credit freeze may not be necessary, there are plenty of other things you can do. Robert Harrow, a credit expert with ValuePenguin, a consumer research company, has a to-do list.

Check credit report

“Consumers are entitled to get free credit reports, check yours for any unauthorized accounts which might have been recently opened in your name. This can be a good first step in discovering whether you've become a victim of fraud,” says Harrow.

Report the Incident

If you spot any fraudulent accounts opened in your name or suspicious transactions, get in touch with the card issuer, file a police report, and report the breach to the three credit reporting agencies.

Consider ID theft services

Consumers who find themselves overwhelmed by the fraud in their name can look into card issuers' ID theft services to recover from the violation. “Citi, for example, helps affected customers by contacting TransUnion to review their credit reports and place an extended fraud alert on their credit files. The alert will transmit automatically to their credit files maintained at Experian and Equifax as well. Issuers also help by walking victims through the process of submitting a police report, and even monitoring affected customers' credit reports for any unusual activity on any other accounts until their case is closed,” says Harrow.

Sign up for an SSN scouring service

Says Harrow, “These services promise to thwart fraudsters before they can commit fraud with your card. Most notably, Discover’s Social Security number monitoring service, which recently launched, will track risky websites that are known to authorities to unlawfully sell or trade personal data. If your Social Security number shows up on one of these sites, Discover will alert you. Additionally, the card issuer will let you know if any new credit cards, mortgages, auto loans or other accounts appear on your credit report.”