Everyone should freeze their credit.
But most retirement savers I talk to have not tackled this simple (and free!) task.
After commenting briefly about credit freezes in an episode last month, I’ve received dozens of GREAT questions from listeners.
- Should minor children freeze their credit even if they don’t have a credit score?
- What other agencies should I freeze my credit with after freezing with the “big three” (Equifax, Transunion, Experian)?
- How will freezing my credit affect my credit score?
Tune in to get answers to these questions and learn more about this critical financial planning task that continues to be overlooked.
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- How to Freeze Your Credit (Step-by-Step Guide)
- 3 Financial Scams to Watch Out For in 2023
- How Much Hackers Get for Your Personal Info
- Victim of Fraud? Request a Fraud Alert
- What is an Extended Fraud Alert
- Password Managers:
- Free Credit Monitoring Services:
- Additional Agencies to Request Credit File or a Freeze:
Credit Freeze: Top 5 Questions Answered
Taylor Schulte: Welcome to the Stay Wealthy podcast, I’m your host Taylor Schulte, and as you may recall, Last month, I highlighted 3 financial scams that were growing in popularity and sophistication.
In addition to several other tips I shared in that episode, I briefly mentioned toward the end that the uptick in identity theft and data breaches should motivate everyone to freeze their credit if they haven’t already.
Since that episode aired, I’ve received dozens of great questions and comments from listeners about credit freezes.
So, today, I’m answering the top five questions here on the show so everyone can benefit and, hopefully, tackle this important yet often neglected financial planning task.
To grab the links and resources mentioned in today's episode, including my step-by-step guide showing you exactly how to freeze your credit, just head over to youstaywealthy.com/201.
Everyone should freeze their credit. Yes, everyone. You, your spouse, your kids, everyone.
In short, a credit freeze helps you protect your personal information by restricting access to your credit reports.
When you freeze your credit, the major credit bureaus (e.g., Equifax, Experian, and TransUnion) lock your credit file. Locking your credit file prevents someone who gets a hold of your identity or sensitive financial info from opening new accounts or taking out loans in your name.
And believe it or not, it’s fairly easy for cybercriminals to get their hands on sensitive information on the dark web. It’s also surprisingly cheap to buy.
According to CNBC, Social Security numbers sell on the black market for $2-$5. Driver’s licenses sell for between $10 and $20 and banking info for between $15 and $25. The most expensive data, according to this article, is passport information which sells for over $1,000 per person.
Again, if someone really wants access to your personal info, they can likely find a way to get it. And if they do, they can cause some serious financial damage. For example, they can open up contracts with phone carriers, clone and swipe your credit cards online, or worse, take out sizeable loans in your name, neglect to pay them back, and absolutely destroy your credit history.
And that’s why we freeze our credit. Frozen credit prevents someone, including you, from opening up new accounts or loans.
So, what happens if your credit is frozen and you need to apply for a loan? You simply ask the lender you are applying for the loan through what credit bureau they plan to obtain your credit report from, and then temporarily unfreeze your credit with that bureau either through their website mobile phone app or by calling them.
While it’s a minor inconvenience when applying for a loan, it far outweighs someone stealing your personal data and opening accounts and borrowing money in your name.
Hopefully, by now, I’ve convinced you that you should freeze your credit. Which leads to the first question:
1) How do I take action? How do I freeze my credit?
To help walk you through the credit freeze process, I’ve linked to my recently refreshed step-by-step guide in the show notes which can again be found by going to youstaywealthy.com/201.
But here are the cliff notes for this 3-step process:
Step 1 - Sign up for free credit monitoring. A free credit monitoring service like Credit Karma (or one provided by your bank) allows you to monitor your credit report and scores, as well as keep an eye on any suspicious activity. This is the first step because you may not be able to sign up for credit monitoring once your credit is frozen.
(Side note, one listener recently asked if freezing their credit would disrupt the credit monitoring service they currently use. And the answer is no. Signing up for credit monitoring is the proper first step and freezing your credit will not prevent those services from working.)
Step 2- Contact and request your credit freeze with each bureau. While you can do this by phone or snail mail, processing it online through each of their websites is easiest. It didn’t take my wife and I more than 15-20 minutes to knock this out.
Step 3 - Once your credit is frozen with each bureau, be sure to securely store the credentials generated when you froze your credit. For example, if you froze your credit by phone, you will have created a unique PIN. And if you froze your credit online, you will have chosen a username and password.
These credentials will be required to unfreeze your credit in the future, and you certainly don’t want them getting into the hands of the wrong person. So, personally, I store them in my secure digital password manager, Dashlane.
But there are others out there like LastPass and 1Password to consider as well, or you can simply add the info to a physical document like a Letter of Instruction and lock it up in a fireproof safe.
The great thing about freezing your credit is that thanks to the Fair Credit Reporting Act in 2018, the cost to freeze and unfreeze your credit in the United States is now free. There aren’t many critical financial planning tasks that are free, easy, and this quick to tackle.
Ok, the next question, which I’ve received a number of times over the years, is:
2) Should I freeze my minor child’s credit and, if so, how do I do this?
So, while minors under 18 typically do not have credit reports, cybercriminals can still use their personal information to open fraudulent accounts. By freezing their credit or, more accurately, by placing a “protected consumer freeze”, you will limit access to their personal information and mitigate the chances of an unauthorized individual opening accounts in their name.
Unfortunately, a “protected consumer freeze” for your minor child must be requested through the mail with each credit bureau.
While each bureau has its own protocol and may require different documentation, generally, you will need to provide:
Proof of your child’s identity. (e.g., Their birth certificate or Social Security card.) Proof of your identity and relation to the child. (e.g., Your driver’s license and the child’s birth certificate.) Proof of your authority to act on the child’s behalf. (e.g., A court order or legal guardianship documents.)
To unfreeze your child’s credit in the future, you’ll once again need to contact each credit reporting agency separately. You may need to do this when your minor child becomes an adult or if they need to access their credit report for any reason, such as applying for a student loan or credit card.
The third question which I’ve received more and more recently given that so many listeners have taken action and frozen their credit is: “ What other agencies should I freeze my credit with after freezing with the "big three" (Equifax, Transunion, Experian)? What else can I do to further protect myself?
So, as mentioned earlier, in addition to opening up loans in your name, cybercriminals can also use your personal info to open up cell phone and cable television account. The main entity in charge of monitoring those accounts is the National Consumer Telecommunications and Utilities Exchange (or NCTUE).
They are essentially a credit-reporting agency for telecom companies, which means if you’re a telecom customer or have a utility bill in your name, then the NCTUE has a “disclosure report” on you.
If you want to further protect yourself, it’s recommended that you place a security freeze on your NCTUE data file in addition to freezing your credit with the major credit bureaus. You can place a security freeze on your NCTUE data file through their website, by phone, or by mail, and I’ll link to everything in the show notes for quick access.
Lastly, there are other credit reporting agencies that maintain records of your personal information. And while you can’t place a security freeze with all of them, you are still entitled to a free copy of your file each year. The main four are Innovis, Telecheck, EWS (Early Warning System), and ChexSystems. I’ll link to all of them in today’s show notes if you want to learn more.
Ok, the fourth question is: Will freezing my credit hurt my credit score?
In short, no, freezing your credit will not directly affect your credit score. However, it can introduce some friction when applying for loans or new forms of credit.
And since the age of your credit card accounts and the diversity of credit types are factors that influence your credit score, frozen credit could indirectly influence your credit score over time if you let the little bit of extra friction it introduces prevent you from following the basics of maintaining a healthy borrowing profile with the major agenices.
In other words, proving that you have the ability to borrow money and pay it back on time is known to improve your credit score. So, if you stop borrowing and building credit because it’s a slight inconvenience to unfreeze your credit when there’s an opportunity to apply for a loan, then your credit score could be indirectly affected by a credit freeze.
Lastly, question number 5: What if I know I’ve been a victim of identity theft? Is there something else I should do beyond freezing my credit?
If you’ve been a victim of identity theft, in addition to freezing your credit, you would also want to consider placing a fraud alert on your credit report.
A fraud alert notifies creditors that they need to take additional steps to verify your identity when they receive a request for new credit or changes to existing accounts.
There are two types of fraud alerts are available:
1. Initial fraud alerts.
2. Extended fraud alerts.
An initial fraud alert is free and only lasts one year but it can be easily renewed.
An extended fraud alert is also free but requires you to file an FTC Identify Theft Report or police report. With one of those reports filed, an extended fraud alert lasts 7 years and also removes you from credit card and insurance offers for five years.
To place a fraud alert, you only need to contact one of the three credit bureaus (Equifax, Experian, or TransUnion), as they are obligated to inform the others once they receive your request.
Ok, I hope today’s episode encourages you to take action and complete this simple, yet important planning task. If you have any additional questions, or you have additional information that you think we should share with listeners regarding identity theft, protecting our credit, or mitigating cybersecurity threats, please do pass them along.
As always, you can email me directly at firstname.lastname@example.org.
Once again, you can grab today’s show notes which contain links to everything I referenced today by going to youstaywealthy.com/201.
Thank you, as always, for listening and I will see you back here next week.
Episode Disclaimer: This podcast is for informational and entertainment purposes only and should not be relied upon as a basis for investment decisions. This podcast is not engaged in rendering legal, financial, or other professional services.