08 Jul How Does a Credit Reporting Agency Security Freeze Work?
In a previous blog post, I provided web links to pages on web sites published by Equifax, Experian and Trans Union dealing with security freezes. In that post, I noted that relatively few people have taken advantage of their credit freeze rights – some 50,000 credit freezes were entered, while there were over 10 million cases of identity theft.
Clearly, not a lot of information about credit freezes is getting out. I first heard the term “credit freeze” on a radio show hosted by a local consumer advocate. I have mentioned the concept to several of my clients, but no one has heard of it. What exactly is a credit freeze and how does it work?
A credit security freeze works by restricting access to your credit reports. If an identity thief gets hold of your personal information (date of birth, social security number, full name, etc.) he will generally make use of that information by opening new accounts in your name and by using a mailing address that he controls. On the credit application, he will include your old address along with a “new” address for the new account. Usually this new address is a post office box, making it untraceable. The identity thief knows that word of this new account will not filter back to you for two or three months and a lot of damage can be done in that period of time.
In the absence of a security freeze, the credit bureau will consider a new account (based on your legitimate, good credit) and will note a change of address. The credit issuer will submit your name and identification information to the credit bureau database and the new account will be approved based on a pre-determined credit criteria.
With a credit freeze in place, however, this new account creation will not happen. Firstly, a credit freeze will prevent the credit bureau from changing your address. Secondly, the credit freeze will prevent the credit bureau from making your information available to the credit issuer. Therefore, no new accounts will be approved or opened.
Every credit transaction will be blocked. If the identity thief tries to use an existing account on the Internet (planning on having the items purchased delivered to an address of his choosing), the freeze will prevent the transaction from going through.
The bottom line – a credit freeze will put a halt to all access to credit in your name. If your identification really is in the hands of bad guys, you will still have a lot of work to do in reestablishing your identity. Imagine, for example, the hassle of starting over with a new social security number.
Ideally, you should request a freeze the instant you realize that your identity has been stolen. In reality, however, people don’t act that fast. You may only act after you receive the first report of improper activity. If you can’t find your wallet, for example, you may spend a day or two searching before concluding that it is really gone, and even then you may not think to request a security freeze until after unpleasant things have started to happen.
Jonathan Ginsberg, Esq.
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