Freezing Your Credit Under Consumer Protection Laws

In most states, consumers lack the necessary tools to combat identity theft. Once criminals has obtained your name, birthdate, address and Social Security number, they can open new accounts in your name, run up huge bills and leave you facing some angry creditors. In many cases, you won't even know that this has happened until creditors are breathing down your neck.

Federal law allows consumers to place a "fraud alert" on their credit report. However, this is an incomplete solution because it does not stop potential creditors from opening new lines of credit in your name. Thieves can continue opening new credit card accounts or lines of credit so long as creditors do not read the alert.

Following California's lead, a growing number of states are allowing consumers to place "credit freezes" on their credit reports. These freezes allow consumers to deny creditors access to their credit reports. Most creditors will not be willing to extend a new line of credit without first seeing the consumer's credit report. So, this effectively stops identity thieves from opening up new accounts.

Each credit bureau charges a nominal fee for placing a credit freeze, unless the person placing the request is a victim of identify theft. However, consumers seeking to open a new account may have to wait up to three days if they choose to temporarily or selectively lift the freeze. Recently, states like New Jersey and Delaware have enacted credit freeze laws with "quick thaw" provisions. In those states, you simply supply a PIN to the credit bureau and your account is unlocked within 15 minutes.

So how do you do it? In California, you must write to the three major credit bureaus and pay a $10 fee to each bureau to freeze your credit report with them. That's $30 for all three. If you have been the victim of identity theft, provide a copy of the police report or DMV investigative report. In California, you may lift the freeze for a period of time or for a specific creditor. When you place the freeze, you're assigned a PIN number, which you can use to lift the freeze. But the catch is that agencies have three days to "thaw" your freeze. In New Jersey, the same notification procedure applies, but if you ask for a freeze to be lifted, agencies must do so within 15 minutes of your providing the PIN number. Bankrate.com has compiled a state-by-state comparison of consumer rights under each state's credit freeze laws.

It's worth noting that a credit freeze doesn't block all inquiries. Your existing creditors still have access to your file. And banks can still use your account to send you those pre-approved credit card applications. Finally, government agencies may have access to respond to court orders, subpoenas and warrants, and to investigate child care support cases and tax evasion cases.

In addition to the freeze costs, credit bureaus may charge additional fees to lift the freeze temporarily. A permanent lift is free. In Vermont, Washington and Illinois, credit bureaus may not charge fees to either freeze a credit report or remove the freeze.

Also, everyone has a right to see their credit report at no charge once a year. To order yours and view it instantly online, visit the credit agencies' AnnualCreditReport.com site.

Last reviewed October 2024