What Is A Credit Freeze? Things You Should Know Before Opting For One | BankBazaar

What Is A Credit Freeze? Things You Should Know Before Opting For One | BankBazaar


With data breaches becoming fairly commonplace these days, here’s how you can prevent unwanted people from gaining access to your private information and credit.

What Is A Credit Freeze Things You Should Know Before Opting For One

Data breaches seem to have become the order of the day. From behemoths like Facebook and Target to credit reporting agencies like Equifax, several organisations have fallen victim to such hacking that has compromised millions of people’s private information.

On September 7, 2017, Equifax pegged the number of people whose personally identifiable information has been breached at over 148 million. Breached information included people’s Credit Card, driver’s license, Social Security numbers, date of birth, phone numbers, email addresses etc. In the event of these rampant breaches, it’s understandable if average people like us want to be extra cautious about sharing our private information, including information about our credit, with unwanted entities or identity thieves. Freezing your credit can help you tackle this problem but you should know a couple of things before you consider exploring this option.

What Is A Credit Freeze?

With data breaches becoming par for the course these days, data security experts are recommending that consumers “freeze” their credit. Freezing your credit means preventing fraudsters or someone looking to steal your identity from opening unauthorised accounts in your name. By “freezing” your credit, you are essentially locking down your credit information and preventing it from being accessed by people who may look at your details of accounts and commit acts of crime and fraud.

Let’s understand this better with the help of an example. Let’s suppose Smita applies for a Credit Card or a Personal Loan at a bank. Once the bank receives her application, to determine whether she is creditworthy, it will check her Credit Score. The bank will request for Smita’s credit report from any of the three credit bureaus like CIBIL, Experian or Equifax.

Based on Smita’s Credit Score, the bank will take a call on whether to lend to Smita or not. Smita may not want her credit information that also contains her private details to be shared with anyone other than the bank. She can do this by informing all the credit reporting agencies that her credit report needs to be “frozen” i.e. details pertaining to her credit report should not be shared with anyone.

Even after your credit information has been frozen, it will still be accessible to certain entities.

  1. You can still access your credit information and get your free credit reports whenever you want.
  2. Your existing creditors and debt collectors can still access your credit information.
  3. A credit freeze will have zero impact on your Credit Score-it will neither hurt nor help it.

Additional Reading: How To Get Over A Bad Credit Report

How Do You Freeze Your Credit?

To freeze your credit, you’ll need to get in touch with each of the credit bureaus separately and follow their individual processes as they might be different from each other. The process might require you to share all the necessary details that they would need to dig up your information so that they can lock it. Once the credit bureau has implemented your credit freeze, nobody will be able to access your credit profile unless you give explicit authorisation to the credit bureaus.

What Are The Pros And Cons Of A Credit Freeze?

Pros:

  1. A credit freeze can help prevent identity theft since potential new lenders won’t be able to access your credit information while the freeze is in place.
  2. Credit freezes are free.
  3. You can get it temporarily lifted when you need to get your credit information checked by a credit bureau.

Cons:

  1. In order to thaw the credit freeze, you will have to get in touch with each bureau separately. This can be time-consuming.
  2. A credit freeze can set back your other priorities-if you’re going to apply for a Credit Card, Personal Loan or Home Loan, you will need to lift the credit freeze and since this process might take time, your application process might be delayed.
  3. A credit freeze can’t help you in situations where fraudsters already have access to your private information for instance, if you’ve been a victim of online banking fraud in the past.

Additional Reading: Sure Ways To Become A Credit Score Guru

A credit freeze can be a viable option if you’re looking to get your data protected from any fraudulent activity or data breach or reduce your chances of becoming a victim of identity theft. But it can also be a cumbersome process to get your credit freeze. So weigh in these factors before you decide to opt for one.

Not sure about your Credit Score? You can download your detailed credit report for FREE in under 3 mins by clicking the button below!

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