Why freeze your credit is usually a bad idea?

In this world where every credit card kick and every online transaction could put your information in the hands of identity thieves, a credit freeze might not seem like the worst idea. This will prevent fraudsters from opening new credit lines on your behalf while allowing you to take out loans and new lines of credit if necessary.

But there are several disadvantages to freezing your credit that most people do not realize. Here are some things to know before making this call.

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How credit freezes work

If you decide to freeze your credit, you must contact the three credit reporting agencies and inform them of your wish. They will basically block your credit reports, so no new creditor will be able to view them unless you provide them with the special PIN that the credit bureaus give you. Your existing creditors will always have access to your reports.

The freeze will stay on your credit report until you contact the credit bureaus and ask that it be removed. Freezing your credit will not hurt your credit score, even if it could make the new credit more difficult.

The disadvantages of the credit freeze

Whenever you wish to view your credit reports or authorize a creditor to do so, you must provide your PIN. If you lose track of this number, your creditors will not be able to view your report and will likely decline your application because they can not assess your creditworthiness. You can still get the credit freeze, temporarily or permanently, but you must return to the credit bureaus and fill in additional documents to prove that you are not an identity thief.

In the past, you also had to pay for credit freezes and defeats. But since September 21, 2018, credit reporting agencies must now offer them for free.

The biggest disadvantage of the credit freeze is maybe all the hassle can not stop the identity thieves. Although a freeze probably prevents them from opening new accounts on your behalf, this can not prevent fraud on your existing accounts. If thieves get your credit card number, for example, they can still face a pile of fees on your behalf, freezing credit or not.

When to consider a credit freeze

Credit freezes are not suitable for most people. If you have not been a victim of widespread identity theft, that is if someone tried to file a tax return and opened several new ones. accounts on your behalf, a credit freeze is probably not worth it.

If your credit card has been stolen or if the thief has only opened one account, you can probably manage it without a credit freeze. Warn the financial institution and credit bureaus to remove fraudulent accounts from your credit report. If it is a simple case of credit card theft, the issuer of your card will probably cancel the card and send you a new one.

Whenever your identity has been stolen, it's always a good idea to remove your credit reports and check for other fraudulent accounts that may have been opened on your behalf. Then, if you think this is necessary, you can place a fraud alert on your credit reports.

Unlike credit freezes, fraud alerts are free and do not need to memorize a special PIN. Instead, they place an alert on your credit reports that warn creditors that they must take additional steps to verify your identity before approving new loans or lines of credit.

You can place a fraud alert on your credit reports by contacting the credit bureaus and asking for it. The alert will last 90 days from the date it was first placed on your report, and then it will expire. You can renew it if you wish.

Credit freezes can protect you from identity thieves, but this security comes at a price. For most people, it's not worth it. Instead, keep a close eye on your credit reports for fraudulent activity and, if you notice, place a fraud alert on your report instead.