A security freeze, also known as a credit freeze, is a little-known financial tool that can help you protect your financial identity. It prevents unauthorized personnel from accessing your credit, which prevents identity thieves from opening new lines of credit (like taking out a loan, or opening a credit card) in your name. Keep reading to learn more about what is a security freeze and when you should freeze your credit.
How Does a Security Freeze Work?
A security freeze works by limiting the people who can access your credit. While places like your existing credit card company and financial institutions (like your bank and credit union) can still see your credit, new places cannot. Because any time you open a new line of credit the new creditor will want to see your existing credit, placing a security freeze means that people who aren’t you (aka, identity thieves) cannot use your name and information for their purposes.
What Are the Disadvantages?
All the advantages of a credit freeze or security freeze can be disadvantages in some situations. Because no new lines of credit can be opened while you have the freeze activated, you will have to unfreeze your credit before apply for a car loan, mortgage, or new credit card. Depending on what you are applying for, you can either unfreeze your account for a single institution, or completely remove the freeze so you can shop around and find great credit options.
How Do I Place a Credit Freeze?
Each of the three credit information agencies (TransUnion, Experian, and Equifax) offer the credit freeze. To completely freeze your credit, you will have to visit each site, or call them and arrange the freeze. You will need information like your name, your current and previous address, date of birth, Social Security number, and other information to prove you are yourself. Cost for a security freeze varies by state. In Wisconsin it is $10 per credit agency.
We hope you were able to get answers about whether or not you should freeze your credit and what is a security freeze. Be sure to check out the other great financial posts from Broadway Auto Credit.