Credit

The importance of a security freeze on credit reports

If you have a credit card or any type of loan, there is a good chance that you are one of 140 million people whose data was stolen from Equifax. The data that was exposed is extremely damaging because it includes not only social security number but also your name, address, date of birth, and credit card numbers.

There are many steps to take to help protect your identity from being misused. In this post, I will talk about the most effective step, which is a security freeze. For the sake of simplicity, I will explain this subject in the form of questions and answers to make it easy for you to understand the process.

What should your immediate action be in regards to Equifax data breach?

The most effective step that actually protects you from identity theft is for you to freeze your credit reports immediately. You should do that with Experian, Transunion, Equifax, ChexSystems, and Innovis. If you have not placed a security freeze with all these 5 major credit reporting agencies, then you don’t have anything effective that will prevent anybody from accessing your credit reports.

What is a security freeze?

A freeze locks your credit file and it does so very effectively because nobody can access it at all unless you manually remove the freeze. However, your existing credit card issuers have access to your reports even if your reports have a security freeze. For example, if you have an active Bank of America credit card, then that bank has access to your frozen credit reports for monitoring purposes. However, the bank will not have access to your frozen credit reports if you apply for a new credit even if you have an existing credit card or loan with the same bank. Any entity that you have an active account with has access to your reports even if there is a security freeze on your reports.

What is the difference between a security freeze and a fraud alert?

A fraud alert is not as effective as security freeze when it comes to protecting you from identity theft. A fraud alert does not lock your reports at all. It simply adds a message to ask creditors to take additional steps to verify your identity. For example, if you have a fraud alert and you apply for Bank of America credit card, Bank of America can still pull your reports and have access to it but it will not approve the application instantly without contacting you first to take additional steps for verification. On the other hand, if you have a security freeze and you apply for Bank of America credit card, Bank of America will not be able to pull your credit report at all and will have no access at all to your report whatsoever.

Why should you add a security freeze to your ChexSystems and Innovis reports in addition to your Experian, Transunion, and Equifax?

Most banks usually pull ChexSystems report when people apply for checking or savings accounts online or in the branch. If you freeze ChexSystems report, you prevent anybody from using your identity to open a checking or savings account. A security freeze on Experian, Transunion, and Equifax may not prevent people from using your identity to open a checking or savings account because some banks don’t pull Experian, Transunion, and Equifax reports when you apply for checking or savings account.

It is also a wise idea to freeze Innovis report because most banks pull Innovis report when people apply for a home mortgage loan. Innovis report is getting more popular and major banks such as Bank of America, Citi bank, US bank, and many others report credit balances for their customers to Innovis credit bureau agency on monthly basis. If you have a credit card or any type of loan with any of these big banks, it is more than likely that you have a credit file with Innovis credit bureau agency.

How long does it take to place a security freeze on all your credit reports?

Experian, Transunion, Equifax, ChexSystems, and Innovis have an online system that allows you to immediately place a security freeze within few minutes. They will send you a PIN number by mail within 7-10 business days so that you can use that PIN number online in the future to temporarily or permanently remove the security freeze. You can visit their security freeze websites to get more details.

Experian: https://www.experian.com/freeze/center.html

Transunion: https://freeze.transunion.com/sf/securityFreeze/landingPage.jsp

Equifax: https://www.freeze.equifax.com/Freeze/jsp/SFF_PersonalIDInfo.jsp

ChexSystems: https://www.chexsystems.com/web/chexsystems/consumerdebit/page/securityfreeze/placefreeze/

Innovis: https://www.innovis.com/securityFreeze/index

If you add a security freeze on your credit reports, will it slow down the process if you want to apply for credit card or any type of a loan in the future?

This is a question that most people have and most people are misinformed and get wrong answers. It is one of the big reasons why people are hesitant to place a security freeze on their reports.

A security freeze does not slow down the process when you apply for any type of loan if you plan ahead. All major credit bureau agencies (Experian, Transunion, Equifax, ChexSystems, and Innovis) developed a great online system where it allows people to temporarily remove a security freeze using a PIN number when planning to apply for a loan. It takes less than 5 minutes to temporarily remove a security freeze and it is effective immediately in most cases.

For example, let’s say you have a security freeze in all your credit reports and you want to apply for American Express credit card online to get instant approval. You will need to go to Experian security freeze website and temporarily remove the freeze for only 1 day using the PIN number that Experian gave you when you initially placed the security freeze. Depending on what state you live in, Experian will charge you a fee around $10 or less to temporarily remove the freeze for 1 day. It takes less than 5 minutes to do it online and then you can immediately go to American Express website to apply for the credit card you plan to get.

If you have a security freeze with all credit bureau agencies, do you need to remove the security freeze from all your reports if you want to apply for a credit card or a loan?

This depends on the bank and the type of loan you apply for. In most cases, this is what usually happens:

If you apply for a credit card, car loan, utility service, or cell phone plan, you may need to remove a security freeze from only one credit bureau agency that particular bank or company uses.

If you apply for a home mortgage loan, you might need to remove a security freeze from four credit bureau agencies (Experian, Transunion, Equifax, and Innovis). Some banks might also pull ChexSystems report if you apply for a home mortgage loan.

If you apply for a checking or savings account, you might need to remove a security freeze from ChexSystems credit agency and one of the three national credit bureau agencies (Experian, Transunion, or Equifax).

How do you know which credit reporting agency a bank uses to pull a credit report?

This depends on what state you live in and what card or loan you apply for. The bank customer service may not reveal or tell you what credit bureau they use.

Fortunately, there are some great online resources that predict which bank uses which credit-reporting agency. One of these resources is creditboards.com

  1. Go to creditboards.com
  2. Click on creditpulls link in the top menu bar
  3. Enter the bank name
  4. Select the state you live in
  5. Click Search

Keep in mind that this tool depends on customer feedback that it saves in the database. Below is an example of a simple search for what credit bureau Chase bank uses in New York.

As you can see from the above search, the tool depends on customer feedback. The tool helps you get an idea of what credit agency the bank most likely will use when you apply for a particular card.

Unfortunately, this tool may not be helpful for predicting what credit agency a bank uses for a home mortgage loan, checking/saving account, or a utility service. In this case, if you plan to apply for a home mortgage loan, you may need to temporarily remove the security freeze from Experian, Transunion, Equifax, Innovis, and ChexSystems. If you plan to open a checking or savings account, you may need to temporarily remove a security freeze from ChexSystems. If you plan to get a utility service or a cell phone plan from another provider, you may need to ask a customer service representative what credit bureau they use and if they don’t reveal that information, then a simple google search might give you a clue.

Does a security freeze affect a third party credit monitoring services such as Credit Karma, LifeLock, Costco Complete ID, or MyFico credit monitoring?

If you have signed up for a credit monitoring service before you placed a security freeze, your existing credit monitoring service will not be affected and your reports will continue to be monitored until you cancel the credit monitoring service.

However, if you plan to sign up for any credit monitoring service after you placed a security freeze, you may need to temporarily remove a security freeze from Experian, Equifax, and Transunion before you sign up for a credit monitoring service. For example, you can temporarily remove a security freeze for only 1 day so that you can sign up for Credit Karma credit monitoring service.

Does a security freeze have any effect on your online account with the Social Security Administration?

If you have signed up for an online account with the Social Security Administration, a security freeze has no effect at all on your online Social Security account. However, if you plan to sign up for an online account with the Social Security Administration after you placed a security freeze, you may need to go to your local Social Security Administration office so that they can verify your identity or you can temporarily remove a security freeze from Experian.

Some credit card issuers offer a free FICO score on monthly basis as one of the card benefits. Does a security freeze interrupt this free valuable benefit?

A security freeze has no effect at all on your existing FICO benefit that your existing credit card issuer provides. Your credit card issuer will be able to provide you with the monthly FICO score as long as you meet the bank requirements for receiving the free FICO score benefit.

Does a security freeze prevent you from accessing your own credit reports?

No, you can still request your free annual credit reports if you have a security freeze. You can still request your reports anytime directly from all credit bureau agencies.

Does a security freeze stop all pre-approval offers that you receive by mail?

This depends on who sends you the pre-approval offers. Any bank that you have an active credit card or loan with, can still send you pre-approval offers for other products that the bank offers. However, you may not receive any pre-approval offers from any bank that you have no existing credit card or loan with.

Do you need to remove a security freeze when requesting a credit line increase for an existing account?

This depends on the bank and the amount of credit line increase you request. Some banks may allow you to request a credit line increase without having to remove a security freeze from your reports as long as you meet the requirements. For example, American Express, Discover, and Citi bank may allow you to request a credit line increase without removing the freeze. However, they may ask you to remove it if their automatic system triggers a manual review. Other banks such as Chase bank may not approve any credit line request if there is a security freeze on the credit report.

Do you need to remove a security freeze when applying for a job?

This depends on your potential employer standard operating procedures and what industry that employer is in. Most jobs that involve financial transactions such as banks and investments institutions may pull your credit reports as part of their background check procedures. Your potential employer HR representative should be able to tell you what credit bureau agency they use so that you can remove the security freeze before you submit the background check application. The background check process usually starts in most cases after you accept the job offer.

Bottom line:

A security freeze is the most effective step that actually protects you from identity theft. Why are you so hesitant to place a security freeze? Do yourself a favor and freeze all your credit reports now.