Thursday, November 13, 2014

Is Freezing Your Credit a Good Idea?

Your credit might be in danger. In fact, technology has created countless ways in which hackers and thieves steal identities and wreak financial havoc on innocent victims. Most people protect themselves by having some form of protection as part of their account.

However, many people choose to freeze their credit as an additional security measure against identity theft. But is freezing your credit a good idea?

There are pros and cons to freezing your credit and understanding the requirements in freezing it will help you decide if it’s the right choice for you.

Why Freeze Your Credit?

A credit freeze has traditionally been offered to account holders who’ve experienced some forum of identify theft of fraud. Recently, the practice has become popular among those who just want to protect themselves in advance.

By freezing your credit, you put your credit report on hold and prevent anyone from gaining access to your credit score or financial history. In fact, not even you can access it without following specific procedures to unfreeze it.

A credit freeze fully protects your reports from access to anyone. Credit inquiries that are commonly performed for loans, purchases, and accounts are also locked out when your credit is frozen.

Benefits of a Freeze

But why would you want to fully lock down your credit? Quite simply, it’s the most secure way to safeguard your credit from financial hackers. It prevents would-be thieves from accessing the most valuable information you have about your money.

If you use a service that monitors your credit, chances are you’ll only find out that you’ve been a victim of identity theft after it’s already occurred. However, by freezing your credit, you proactively prevent any attack on your finances.

What to Watch Out For

Freezing your credit also has some drawbacks that you should consider. It can be an inconvenient way to protect your credit given the difficulty of allowing anyone to access your credit.

So if you want to apply for a loan, rental, or make any purchase that requires a credit check, you’ll have to plan in advance in order to allow the lenders access.

This also requires you to go through specific procedures, which can take time and cost money. There is a fee involved in unlocking your credit, as well as the need to provide a special pin number that you’ve established beforehand.

The cost of unfreezing your credit will vary depending on your local requirements. Different lenders use specific credit bureaus. You may need to unlock your credit with all of them if a lender requires it.

However, if you’re freezing your credit with a help of a mortgage broker due to identify theft, then the fees will not be required. In all other cases, you will likely need to pay for any changes to the status of your credit freeze.

Most people aren’t aware of the frequency with which lenders and other parties perform credit inquires. So make sure that you understand which ones do, in order to prevent the inconvenience and cost of freezing your credit repeatedly.

The following are just some examples of when someone might require access to credit:

  • Mortgage
  • Insurance
  • Credit
  • Loan
  • Job application
  • Cell phone service
  • Home utilities
  • Online transactions

In order to protect your credit from identity thieves, there’s no better way than freezing it. It prevents access to your credit score and protects your most valuable information.

Although there are some drawbacks with respect to the fees and inconvenience of freezing your credit, the benefits can outweigh them with the full protection it provides and the peace of mind you’ll have around your personal finances.

Venetia Rose has been a freelance writer and blogger. She loves to share and keep herself updated with the latest tips in mortgage and financial consulting. Her interests are cooking, photography, craft and painting. Follow her on Face book

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