During 2008, the Federal Trade Commission (FTC) received more than 300,000 complaints regarding identity theft. More complaints were filed regarding identity theft than for any other reason. On average, nearly 9 million people become victims of identity theft each and every year, many of which are unaware. Credit card fraud is the top method of identity theft. Placing a freeze on your credit reports can help close the door to criminals, making it nearly impossible for cards to be opened in your name.
History
In the past, it was up to each state to decide whether to offer consumers the ability to freeze their credit. California led the way with this important legislation in 2002 by passing the first credit freeze law. Since then, all other states except for Michigan, Missouri and Alabama have followed suit as of December 2009. In 2007, the three credit bureaus--Equifax, Experian and TransUnion--joined together to offer consumers in every state the ability to place this important feature on their reports.
Significance
The only way to prevent criminals from opening accounts with your name, Social Security number and birth date is to freeze all three credit files. When a freeze is placed, creditors are unable to access your credit file. For example, an identity thief rummages through your trash, finding a bank statement with all your information. He goes to a car dealership and tries to finance a vehicle in your name. With a credit freeze in effect, the dealership would attempt to process the paperwork, but the credit file would say "frozen," not allowing the dealership to run your credit. The thief would be unable to obtain financing.
Process
When placing a credit freeze, you have to remember to place it individually with each credit bureau. Consumers can make these requests online, over the phone or by mail. Information necessary for the placement of the freeze is your full name, address, phone number, Social Security number and date of birth. The credit bureau will then give you a special personal identification number for you to use when you apply for new credit and need to request a temporary suspension of the freeze. Contact each credit bureau in advance of applying for new credit for the freeze to be lifted. This can be done over the phone or online.
Cost
Placing a credit freeze varies depending on the state where you live. Some states offer the service free to all consumers, while others charge a fee from $3 to $10 per credit file. In all states, a freeze is free to individuals who are victims of identity theft and for seniors 65 years old and older. States can also choose to charge a fee to thaw your credit file when you decide to apply for new credit.
Misconceptions
Many people think a credit freeze will prevent anyone from being able to see their credit. This is untrue. Companies with a permissible purpose such as creditors for accounts you already own and collection agencies are still able to view your credit files. Placing a credit freeze does not impact your credit score in any way.
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