Everything You Need to Know About the Loan Freeze
Equifax last week announced a ” cybersecurity incident ” that affected 143 million customers. Between freezes, fraud alerts, and credit monitoring, you can raise your hands trying to figure out what to do.
First, think twice before signing up for Equifax’s free credit monitoring . You can do it yourself. Annually monitor your credit from all three bureaus at the website annualcreditreport.com, and there are a number of free tools and services that can also help you keep track of your credit. We’ve shown you how to read and transcribe the report as soon as you receive it.
However, you want to put your report on hold – and possibly a fraud alert.
What is a credit freeze?
Freezing restricts access to your credit report , making it impossible for a thief to get a line of credit in your name (unless they crack your PIN, we’ll get to that). If you suspend your report with a credit bureau, that bureau will not release your report when the company requests it. Let’s say a thief stole your Social Security number and applied for a line of credit at Chase Bank. If you have frozen your report, Chase will try to pull your report, but find that it is frozen. Thus, the thief cannot open a new account.
In fact, even aside from this Equifax fiasco, you can still view the freeze as a preventative measure. Forbes explains :
“Someone who doesn’t want to borrow money may want to freeze their loan for security reasons. A good candidate would be someone who owns their home or is a long-term tenant who has no plans to buy a new car or get new credit cards in the near future. ”
Freezing does not affect your account, according to the FTC, so there is no need to worry about that. Plus, you can still get your free annual freeze credit report, so monitoring your credit history isn’t a problem either. While the freeze prevents new lines of credit from emerging, it does nothing to protect thieves from writing off existing lines of credit, so you still want to control your lending activity .
Of course, if you really want to get a new line of credit, you need to “unfreeze” the freeze before applying.
Freezing is not reliable
When you freeze your report, you receive a PIN to use when you are ready to unfreeze the freeze. This PIN allows you to freeze and unfreeze the report at your discretion. As the New York Times explains, there is only one problem:
“The security freeze will not protect you if thieves break into the vault of the company supporting the freeze. This is what happened here, and now we will take years to see what happens next. “
Equifax’s system for generating “random” PIN codes was also very problematic:
The Naked Security blog explains why this is a problem :
PIN codes are 10 digits long. If Equifax randomly chooses numeric PINs, attackers have a one in ten billion chance of guessing the correct number the first time (by the way, this still won’t be considered a strong password , but that’s good). Equifax has reduced the chances of a successful guess.
Equifax has since updated its system to generate more random PINs, but the problem remains: if hackers break into the correct store, which has already happened, they can gain access to your PIN. This does not mean that you should avoid freezing, it just needs to be borne in mind.
How to freeze reports
The process of freezing your report is fairly straightforward, but unfortunately, you might have to pay between $ 5 and $ 10 to freeze the report at each bureau. Here’s where you can sign up for a freeze at each of the three major credit bureaus:
You can also call them:
- Equifax: 1-800-349-9960
- Experian: 1-888-397-3742
- TransUnion: 1-888-909-8872
If you are applying for a loan, check with your lender or service provider what they recommend. “If you are in the process of buying a loan, there is no point in stopping your credit report,” fraud expert and MagnifyMoney founder Nick Clements told us. “If you have a credit freeze on your account, you can temporarily cancel the freeze to allow you to shop for the loan. Loan freeze placement and withdrawal fees vary by state . ”
Your lender should be able to tell you if he has already withdrawn your report, in which case you can go ahead and freeze, or when they plan to thaw, so you know when to unfreeze. For example, I am refinancing my home, and my support staff advised me to pause my report.
Pay attention to the fraud warning
Fraud alert is another option (and it’s free) that should be considered in addition to freezing. With a fraud alert, your credit report gets flagged and lenders and lenders must take additional steps to verify your identity. “For example, if you provide a phone number, the company must call you to check if you are the person applying for the loan,” explains the FTC. And there are three types of alerts available, according to them :
- Initial Fraud Warning. If you are concerned about identity theft but are not yet a victim, this fraud alert will protect your credit from unverified access for at least 90 days. You can post a fraud alert on your file if your wallet, social security card, or other personal, financial, or account information is lost or stolen.
- Extended fraud warning. For victims of identity theft, extended fraud warning protects your credit for seven years.
- Active military service. For those military personnel who wish to protect their reputation while serving, this fraud warning is valid for one year.
The good news is that you don’t have to ask every bureau for a fraud notification. Experian explains:
“When you request the addition of a fraud alert to any of the three major credit bureaus, the bureau you contacted will notify the other two, and alerts will also be added to those bureaus. A fraud alert or initial security alert will alert lenders that you may be a victim of fraud. This extra precaution will notify a potential lender to contact you before making any new line of credit in your name. This fraud alert will remain on your credit report for 90 days. You can renew the fraud notification when it expires. “
Here’s where to go if you want to include a fraud alert on your report:
Again, you only need to set an alert with one company and then they have to notify the rest. “The fraud warning is weaker than the credit freeze. If you block your account, you don’t need to warn of fraud, ”says Clements. “You might choose to put an alert on your account instead of freezing, but identity theft can prevent even reasonable extra precautions.” Cnet recommends placing both a lock and a fraud warning on your account. If a thief finds a way to pass 2-step verification, your report will still be frozen, which will be another barrier to entry.