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Security Freeze And Credit Reports

by: Sahil | last updated: October 30, 2009
Tags: Security freeze, credit reports, credit report lockdown, credit lock down, credit lock

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Security Freeze And Credit Reports

A security freeze allows an individual to control how data is sold by the three credit reporting agencies Equifax, TransUnion, and Experian. A security freeze is also called as a credit report lockdown, credit lock down, or a credit lock. The feature enables a person to lock the data and stop access to the credit report by any lender or financial institution.

The data remains locked and inaccessible until the consumer gives permission to unfreeze or unlock the credit report. Today security freeze is available in almost all the states except for Alabama and Michigan. The pioneer in offering this service was TransUnion which was the first credit bureau to freeze the credit report on a consumers request.

In 2007 all the three credit bureaus including Experian and Equifax agreed to start providing this service to their consumers all over U.S (Exceptions being Alabama and Michigan). The first state to pass a law regarding security freeze was California; a bill that was sponsored by Debra Bowen in 2003.

Credit freezes are usually used in order to prevent identity theft and are important since almost 15% of thefts occur in the accounts that are comparatively new. In origination of credit, access to the credit report is imperative and a freeze put on a report will ensure that criminals cannot open an account in a persons name whose report has been frozen.

Even the consumer cannot apply for credit if a security freeze is placed on the report and must unfreeze the report in order to apply for credit and related products. The freezing and unfreezing of reports carry a fee which can range from $10 to $12 according to the bureau and the price of living index.

Security freezes work on the principle that lenders usually require the credit report before approving any credit to the consumer. So if the report is frozen then the creditor may flatly refuse to advance a loan or a credit to anyone who applies for the same. This way fraud can be stopped and detected; however, security freeze is not the same as a fraud alert which keeps the report open but does not mention the fraudulent (proven) information to potential lenders.

There are some disadvantages of placing a security freeze on your account such as delayed loans and difficulties while acquiring credit. However the advantages of a credit freeze outweigh the disadvantages and are good for protecting your credit score. If there are no hard or soft inquiries (fraudulent or otherwise) because of the freeze then your score will be protected from such harmful influences.

In order to completely freeze your credit report it is necessary to contact all the three credit bureaus individually. The fees for freezing your report may differ from state to state and no fee is charged if the consumer is the victim of an identity theft. Moreover the credit bureaus have started to provide online freeze services since 2007 and a consumer can freeze the credit report using their websites. This service is available to those customers who have availed of the credit monitoring services offered by the credit bureaus.