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Basically, both credit freeze and credit lock prevent others from accessing your credit information to safeguard your account against fraudsters who want to try to open a new credit using your name.
The credit bureaus often highlight convenience and offer special promotions to entice consumers to use credit locks. For example, Equifax has introduced a new product called “Lock & Alert” which they offer free for life.
Nevertheless, you have to remember some important differences before you decide which among the two you should employ.
- A credit freeze makes it impossible for thieves and fraudsters to apply and get approval for a loan in your name. At the same time, a credit freeze has no impact on the credit score.
- A credit lock is promoted as a faster and more convenient substitute for the credit freeze. Unlike with credit freeze, customers can activate or deactivate credit lock through online banking or by a mobile application.
- Since 2018 credit freeze became free for all customers. However, when it comes to credit lock Equifax and TransUnion offer it for free, but the monthly cost for such service with Experian is $25.
How Does a Credit Freeze Work?
A credit freeze (sometimes goes by the term ‘security freeze’) is an option that gives a consumer the privilege to “lock” his data at major credit bureaus.
When you do this, you make it impossible for identity thieves to use your name on anything that will require your credit report. The credit bureaus will give you a password that you can use to temporarily lift the freeze or permanently remove it.
When you execute a credit freeze, it will not affect your credit score at all. You will also be able to request your annual credit report. One downside of this is, you’ll have to lift the freeze in case you are applying for a job, trying to rent an apartment, opening a new account, or buying insurance. On top of this, a credit freeze does nothing for your existing accounts, so thieves can still use them. To protect yourself, you need to monitor your credit card, bank and insurance statements to see if there are charges that you did not authorize or know about.
- You need to initiate a security freeze at each of the three credit reporting agencies: Experian, Equifax, and TransUnion.
- You need to use your PIN code each time you want to free or unfreeze your credit.
- When you want to unfreeze your credit report, use the same method that you employed when you initially froze it. If you froze your report through each of the three credit reporting agencies we mentioned above, you should use your PIN code to unfreeze it. Note that you may have to pay a fee for this action depending on the state regulations on the state where you reside.
But you should keep in mind that even if you opt for a security freeze, your creditors and lenders which you have an existing account with can still access your report and score without the need for your PIN.
Aside from them, some government offices, including law enforcement agencies, can also access your details even if you’ve installed a credit freeze.
How Long Does a Credit Freeze Last?
A credit freeze usually lasts until it is lifted. A credit freeze, however, only lasts seven years in a few jurisdictions, according to the Federal Trade Commission (FTC). There are two ways to temporarily unfreeze credit: Lift a freeze for a set period of time. If you're looking for a mortgage or a vehicle loan, or if you're applying for a credit card, you could do this.
Unless you know which credit agency a creditor uses and opt to lift your credit freeze at that one, you must unfreeze your credit with each credit bureau individually.
Do Credit Freezes Hurt Your Credit?
Your credit score will not be harmed by a credit freeze. Credit freezes do not prevent you from using credit; you may continue to make loan and credit card payments, and creditors will continue to record your activity to credit agencies. Because your credit score is based on the information in your credit file, it may and will change.
Building up good information can boost your score; the most crucial criteria are paying on time and utilizing credit responsibly.
How Does a Credit Lock Work?
This is a relatively new credit security service for consumers from the three credit bureaus – Equifax, TransUnion, and Experian. These three credit bureaus are promoting credit locks as a faster and more convenient substitute to credit freezes.
It is almost a clone of a credit freeze because creditors also won’t be able to access your credit file. In the same way, if you want to protect your credit, you need to lock your file with all the three credit bureaus. The distinguishing features of the two are in the way you can lock or unlock your credit file, the cost, and the regulations.
When you talk of credit freezes, you will note that it is the state law that regulates and guarantees them. For example, if you authorized a credit freeze on your credit and someone improperly accessed it, you would not incur financial losses because the credit bureaus would take the responsibility. The law guarantees that kind of protection for you.
A credit lock remains a direct contractual agreement between you and the individual credit bureau, so at present, it is not clear who will have the liability. The contract that you will sign with them remains to be an unregulated agreement at the moment.
You can use an app to unlock your credit or do it online. With a credit lock, you have the convenience of activating or deactivating the lock online or via a mobile application on your smartphone. All you need is an individual username and password. To do the same with a credit freeze you’ll have to go online, or mail a request, or personally call the credit bureau, then use your PIN to initiate the transaction.
Doing a credit lock with one credit bureau does not automatically create the same action with the other credit bureaus. So, for a more secure credit lock, you should individually lock your credit with all three credit bureaus – this is also how you should perform a credit freeze.
When Should I Freeze My Credit?
As a safety measure, you should contemplate freezing your account if you have been or are a victim of identity theft. In fact, if you only suspect that a thief has acquired your personal information but are not 100% sure, it still is a good idea to put a freeze on your credit file. It will safeguard you from identity theft and the possible financial consequences that may happen because of it. On top of that, you relieve yourself of the stress of worrying about identity thieves prowling on your data to commit a crime using your name.
It might be a good step to freeze your credit file if:
- Bills and/or collection notices under your name or another name comes to your house – but they aren’t yours.
- Identity thieves have already victimized you in the past or if thieves stole your credit card details at one time
- You notice new inquiries appearing on your credit report from a business that you’ve never dealt with.
- The bank has informed you that there has been a fraud incident involving your account.
- You receive a verified notification from a company you’re dealing with that got hit with a data breach and your data was among those that the hackers illegally collected.
- You have no intention to get a new credit whatsoever.
A report by Consumer Financial Protection Bureau revealed issues with purchase information shown in the credit card statement was the highest complaint at 27%. Though not in a specific category, other features, terms, or problems followed at 13%. This is less by half compared to the leading complaint. However, Americans struggled the least with paying their bills, which stood at 2%.
When Should You Lock Your Credit?
Between a credit lock and a credit freeze, a credit lock appears to be simpler and more convenient to resort to.
Primarily, you use a credit lock to protect your information or as security if thieves have compromised your information. There’s a convenience here that empowers you to instantly allow lenders to access your report and then immediately lock it again in a flash. This is very helpful if you’re getting a new home or car, for example.
Since at present, there’s still no law that specifically governs credit locks, consumers have no choice but to agree with the provisions on the service agreements. One significant feature of the agreement is that the credit bureaus do not guarantee an error-free or uninterrupted service.
Just like with a credit freeze, you have to execute a credit lock with all three bureaus if you want it to be effective.
You can implement a credit lock at each bureau’s website and also use their respective apps to lock or unlock your credit report. They are not exactly identical as each bureau offers their own version of the credit lock so it’s best to examine exactly what you are contracting them for.
Cost of Service: Credit Freeze Vs Credit Lock
Starting September 21, 2018, the three credit reporting agencies, TransUnion, Experian, and Equifax have dedicated a page on their respective websites that allow users to request for fraud alerts and credit freezes. The FTC also made links to these pages available on their website at IdentityTheft.gov.
As a benefit to the active members of the U.S. military, they will be able to get free electronic credit monitoring from the three major credit-reporting agencies for an entire year. After that period, they can renew the service according to their length of deployment. Parents or legal guardians can now also initiate credit freezes for their children or ward under the age of 16.
With respect to credit locks, only two credit monitoring bureaus, Equifax and TransUnion offer credit-lock products without cost. But we’ve said that it’s not really safe to lock down only two of your three main credit reports. The best security is to lock all three.
When you go to Experian, you can subscribe to their service which they call CreditLock through CreditWorks. The first month of access will cost $5 and your succeeding months will be 25$ monthly. Experian’s credit lock product also includes daily credit monitoring and gives you an alert when someone tries to apply for credit while your report remains locked. You can also access your FICO Score 8 and your Experian credit report.
You have two alternatives if you wish to lift a credit lock on any of the credit bureaus: make a temporary credit lock lift, which lifts the credit freeze for a short period, or thaw your credit permanently.
You won't have to worry about remembering to unlock your credit if you have a temporary credit thaw. The credit bureau will automatically unlock your credit report when the specified time period has passed. A permanent credit thaw, on the other hand, permanently unlock your credit.
A credit freeze can help discourage identity thieves from creating new accounts in your name, but it won't stop them from using your current accounts to conduct fraud. This implies that a payment card in your wallet might be used by criminals.
However, customers should be aware that a free credit freeze may give them the false sense of security that their personal information is now protected. The truth is that credit freezes alone aren't enough to keep identity thieves at bay. Freezes are restricted since they only serve to protect you from new accounts being started in your name.