Credit Freeze: Worth it?

by | Sep 14, 2017 | Financial Planning

In this post we discuss what is a credit freeze, is it worth getting one, and what happened with the Equifax breach and why it may impact you.

Part of our “job” so to speak is to manage your investments. But another part of what we do is help you plan safely for the future. So when a security breach (like what happened with Equifax) occurs, you need to know what took place, what to do next.

The Equifax Breach: What happened?

According to numerous reports on line, up to 143 million individuals may have had their credit information exposed to hackers over the recent months. That is a lot of data on nearly half of all Americans, out there for the taking. What’s worse: is it has been speculated a glaring software weakness was discovered in March, but not repaired for two months, in May.

On the surface, a two-month span for a patch may seem careless and sloppy. After all, if you turn on a Windows computer, it ALWAYS seems to be updating and patching. However (if done all at once on a large corporate-size scale), repairing a software issue on servers for a giant database like Equifax could knock them offline for several days. And for a stock market hanging on every penny per share of earnings, there are only ninety days until the next earnings release. Taking down your servers to repair a patch seems like a costly fix. To accurately test all facets across all tasks, a repair patch could take several weeks, even months. I think Equifax may deserve a pass on this point, nevertheless we all pay the price for identity theft.

Equifax claims it has no knowledge of the depth of the exposure, but states that credit reports for up to 143 million people could be exposed. What often happens with identity theft is a scammer will establish a new account in your name, but the bills/statements get delivered elsewhere. It’s very possible (and happens in real life!) that folks do not even KNOW their credit has been wrecked until they apply for credit elsewhere. Or when harassing phone calls begin coming from collectors. You could be a victim of identity theft for a period of time — and not know it.

The Equifax Breach: What to do

There are steps you can take now, ranging from “doing nothing” to being pro-active. Here’s what we recommend: freeze your credit files.

When freezing your credit file, you essentially block most companies from “pulling” your credit record.  If someone is attempting to borrow money or establish an account (or identity) under your name, a credit check will be run. This also happens when individuals open brokerage accounts. Freezing your file prevents future lenders from accessing your credit record. If they cannot see your file, you (or your identity thief) likely won’t be extended credit.  A credit freeze can be lifted, and that is important, especially when you know you will be having a credit check run on your credit in the coming days/weeks.

A credit freeze does not impact your credit score

It also does not prevent you from getting your own credit report once per year. It will prevent you from opening a new account (we’re not fans of debt anyway!), but know that a credit freeze will also be a speed-bump when getting insurance, signing a lease and some other business transactions. A freeze also won’t be able to stop someone who already has access to your credit/charge accounts. Check your accounts often! Also, your current creditors can STILL access your credit report, but a freeze stops new credit requests.

To clarify, thecredit freezere is “new account fraud” and “existing account fraud.” A credit freeze will stop “new account” fraud in its’ tracks. But the only way to keep tabs on “existing account” fraud is to log in and look at the activity in your accounts, and check your statements. Report transactions you do not recognize. A simple phone call can go a long way toward resolving problems.

In several cases of existing account fraud, scammers will do nothing for months at a time, then try a few small transactions for a few cents or a few dollars, before moving onto bigger amounts. I know we should be doing this stuff already, but how many folks even LOOK at their statements each month? And of course, immediately report lost or stolen cards. Try to not let the cards out of your sight — think about the waiter who disappears with your credit card and waltzes back ten minutes later. Your vigilance will pay off.

Credit Thaw/Un-freezing your Credit

Most credit freezes last until you take it off. There are a few states (KY, PA, SD) where there is a limited time (seven years) where credit freezes need to be renewed. In most states, you can simply contact the credit agencies to place a freeze or (then) lift a freeze. In most states, the cost of placing a freeze is free, or a small amount (usually $5). Un-thawing (lifting) a credit freeze will likely cost a few bucks as well. For example, in New York and in New Jersey, it is free to initiate a freeze, and costs $5.00 to lift a credit freeze.  See the link, for the state-by-state list (below).  Seems worth it to us.

There is a TON of information available online, but yet, several companies seem ripe to sell you a “credit protection” kit. Don’t do it.

Instead, get some education (for free), from reputable sources:
Here is a source that lists the costs of freezing/thawing your credit files by state (scroll down about halfway):

Comparing credit freeze versus fraud alerts:

More questions/answers about credit freezes:

Check out even more information about “credit freeze” — from the FTC:

And the most recent bad-boy (Equifax) said it would waive all fees until Nov. 21 for people who want to freeze their Equifax credit files (again, it is free to freeze your credit files if you reside in NY/NJ). It will also refund any fees that anyone has paid since the breach was announced, though the company would not say whether this would be automatic.

Contacting the Credit Agencies:
Equifax — 1-800-349-9960   (these folks may be a little busy currently!)
Experian — 1-888-397-3742
TransUnion — 1-888-909-8872
Innovis — 1-800-540-2505

What is a fraud alert?

A fraud alert allows creditors to pull your credit report, but they must verify your identity first.  Fraud alerts are automatic if you have been a victim of identity theft.  For example, if you provide a telephone number, the business must call you to verify whether you are the person making the credit request. Fraud alerts may stop identity thieves from establishing credit in your name. Keep in mind a fraud alert may not prevent the misuse of your existing accounts. Again, check your accounts often!

Is credit monitoring worth it?

We are not fans of credit monitoring. They are (often) more expensive than a credit freeze, and if you are being diligent, you can stay on top of items that appear in your credit history.  Now, if you don’t plan to open many new accounts in the coming years, the freeze may be the way to go.  We would pass on credit monitoring. 

This was a recent excellent article in the NY Times about the events at Equifax and steps to take now:

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