The massive Equifax data breach occurred approximately one year ago, resulting in the theft of Social Security numbers, birthdates, names, addresses, and in some cases driver’s license numbers. The number of individuals involved was staggering, nearly 147 million. Shortly following the breach, Scott wrote a Viewpoint outlining potential countermeasures for individuals interested in protecting themselves from identity theft. Not to fully rehash these alternatives but they included placing a fraud alert on your credit file, the use of a credit protection service, or a credit freeze. Scott’s article is still accessible on our website, and given the prevalence of credit fraud, the use of one of these alternatives is worth strongly considering.
The alternatives for protection provide varying levels of safety and each comes with its own set of pros and cons. The strongest form of protection is a credit freeze, which is about to become free for consumers under a new law passed in response to the Equifax breach. In May, President Trump signed the Economic Growth, Regulatory Relief and Consumer Protection Act. Under this law, starting September 21st the major credit reporting agencies are prohibited from charging consumers when they freeze or unfreeze their credit.
To clarify what a credit freeze is, it does not prevent you from utilizing your existing credit—that credit card in your wallet or purse will still work! Instead, a credit freeze restricts access to your credit report, making it harder for thieves to apply for loans or lines of credit in your name. As an added bonus, a freeze significantly reduces the number of credit solicitations received in the mail because these solicitations are typically pre-screened based on the individual’s credit.
However, there are some negatives associated with a credit freeze. First of these is the hassle of having to place or remove the freeze. Each of the three major credit bureaus—Equifax, Experian, and TransUnion—must be contacted separately in order to freeze your credit. Unfortunately, there is no centralized location that allows you to freeze your credit across all three bureaus. Furthermore, once the freeze is in place, if you are going to apply for an auto or mortgage loan, you will need to contact each of the bureaus beforehand in order to lift the freeze and allow your potential lender to pull your credit report.
In addition to the hassle element, the credit bureaus historically charged fees in order to place or lift a credit freeze. Consumers typically had to pay a fee of $5-$10 for each freeze they placed or lifted on their credit file. Considering a consumer with an existing credit freeze that wanted to apply for a loan would have to unfreeze and then again refreeze credit at each of the three credit reporting agencies, total fees could come to $60. The credit bureau waived these fees in the aftermath of the Equifax breach, but we and most others assumed they would eventually avail themselves of this revenue source. After September 21st, under the new law fees will no longer be an issue.
The new law also requires the credit reporting agencies to set up web pages to make it easier for consumers to take advantage of their new rights. This should help make placing and lifting credit freezes less of a hassle. Simply go to the relevant website and plug in your information. Furthermore, under the new law the credit bureau to which you make the request to unfreeze your credit has to do so within an hour of the request. This helps to minimize the inconvenience of having to plan too far in advance of submitting a loan application.
Contact information for each of the agencies is given below. Once you sign up for a credit freeze you are given a PIN, which is used to unfreeze your credit file. You will want to make sure you keep close track of your PIN, as the process of obtaining a new PIN will likely be painful and time consuming. Unfortunately, it appears you will need to maintain three separate PIN numbers, one for each bureau.
One final note, with the new law parents nationwide are also able to get a free credit freeze for children under the age of 16. Before the law this was only available in certain states. Children are often targeted for identification theft because of their clean credit records. Also, if you have guardianship, power of attorney, or conservatorship over an adult, you can get a free credit freeze for that individual provided you can show proof of authority.
Credit freezes won’t stop all forms of identification fraud but they do provide a good level of protection. That they will be free starting September 21st eliminates one of the “cons” we previously highlighted. The minor hassle associated with placing and lifting your freeze is a very reasonable tradeoff for additional peace of mind. Breaches have become too frequent and broad. Doing nothing is not the best option.
Here are the websites and customer service numbers to obtain a credit freeze.
James M. Skubik, CFA