What Is A Credit Freeze

(Identity theft via credit cards has been a big issue lately as thieves and criminals become savvier in their skills to steal personal information. )

If you have lost your wallet or credit cards, the best thing to do is cancel your credit cards as soon as you realize the items are missing.

A credit freeze is something that many consumers think will prevent their cards from being used, but this is not true.

There are actually a lot of myths associated with a credit freeze, and it is often times confused with a fraud alert. But in reality, these are two completely different things.

A credit freeze is actually something put in place that stops any third parties from accessing your credit file.

A November 13, 2006 article by Leslie Hunt of Bankrate.com, “14 myths about credit freezes,” discusses the common myths associated with them.

“By now, you might have heard about credit freezes. A credit freeze prevents credit bureaus from releasing your credit report or score to new lenders, insurers and other new service providers.”

“The credit freeze often gets confused with the fraud alert, which tells new creditors that the consumer may have been a victim of fraud and asks creditors to take additional verification steps before issuing credit.”

Also, credit freezes are not available in all states, as of now there are only 20 states that allow their residents to take out one, and anyone across the United States can issue a fraud alert.

One of the biggest myths associated with a credit freeze is that you cannot use your credit card during a freeze.

“Despite what the term ‘credit freeze’ might imply, you can still use your active credit cards without issue. The only time the credit freeze will pose a hindrance is when you apply for new credit. Unless you thaw your credit file, the creditor won't be able to check your credit report or score.”

So, this means that you (or the person who stole your cards) can still go on a shopping spree after a credit freeze is issued.

Another huge myth is that many people think that credit freezes will stop or prevent identity theft.

“They should block identity thieves from opening new accounts in your name and taking out loans, but if the lender, service provider, landlord or insurance company doesn't look at your credit report, then credit could get issued in your name, utility accounts could be opened, apartments could be issued and insurance policies could be obtained in your name. You'll still want to guard your personal information.”

Beware that if you do freeze your file for any reason, it may take a while for it to “thaw.” In other words, do not expect it to be removed over night. Also, when a freeze is lifted, it will no longer be visible ever again, it just goes away.

Back to Articles