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Why I’m Freezing My Credit and You Should Too

Mark Smith, CFP®, CPA/PFS, CIMA® - Thursday, September 21, 2017

Why You Should Freeze Your Credit | M.J. Smith & AssociatesBy now, you have probably heard about the September 7 announcement of a data breach at the credit bureau Equifax. The breach, which affected some 143 million U.S. consumers, continues to make news this week, as Bloomberg reported a second major hack in March that Equifax said is unrelated. This news came after the U.S. Department of Justice initiated a criminal probe into a stock sale in August by three Equifax executives.

If the news is disturbing, it should be. While data breaches have made news before, this one is especially concerning because of the type of information placed at risk. The data captured in the Equifax breach reportedly includes Social Security numbers, birthdays, addresses, and possibly driver’s license numbers – enough information that an identity thief could use to apply for a credit card, open a bank account, or request a line of credit in your name.

 

Why should you initiate a security freeze?

I made the decision to initiate a security freeze at the three major credit bureaus – Equifax, Experian and TransUnion – as a result of the breach, and I recommend you consider doing the same. Here’s why: When you “freeze” your credit, no one can open a credit account in your name, which will save you much pain and heartache if someone were to steal your identity. If a thief were to apply for a credit card in your name at Neiman Marcus, for example, Neiman Marcus would be unable to access your credit file under a security freeze. Without being able to verify your credit, it would likely turn down the credit request. Krebs on Security also notes that with each credit inquiry comes the potential to lower your credit score, so preventing creditors from accessing your credit file can also help protect your credit score.

It seems like peace of mind is the major benefit of freezing your credit, so why wouldn’t you do it? One reason is convenience. If you don’t plan to buy a house or a car, and don’t plan to apply for a new credit card, the inconvenience of having your credit frozen is minimal. It may be much more inconvenient for young people, however, because they are just starting to establish credit and make major life purchases. You can unfreeze your credit any time, or “lift” the freeze temporarily (sometimes at a small cost), but if you plan to make a major purchase that requires credit, you need to remember to remove the security freeze and wait a few days for it to take effect before making your purchase.

 

While freezing your credit will help to prevent identity theft, it is not a foolproof solution.

Someone could still hack your credit card and other accounts directly. For example, an individual could steal your credit card information and still go on a shopping spree online; the person just wouldn’t be able to open new accounts. If you find mysterious charges on your credit card account, report it right away to your financial institution and you may not be responsible for the charges. However, clearing your name under these circumstances is still a hassle! 

Placing a security freeze on my credit made sense for me, and I encourage you to weigh the pros and cons for your situation. If you decide to initiate a freeze, the process is simple. You can contact the three major credit bureaus either by phone or online:

Colorado residents can place a security freeze on their accounts at no cost to them. However, there may be a $10 charge to lift the freeze temporarily or remove the freeze permanently.

 

If you don't freeze your credit, consider this.

Even if you don’t elect to freeze your credit, consider requesting a free credit report and score (you can do this at no charge once a year) by going to AnnualCreditReport.com. Get in the habit of checking your credit report for credit inquiries that don’t make sense, or accounts that you didn’t open. Also, check your credit card statements for any mysterious charges each month.

The Equifax breach isn’t the first, and it won’t be the last. That’s why it pays to be vigilant today, and every day. If you are a client and have questions about freezing your credit, please feel free to contact us. We appreciate the opportunity to serve you.

 

 

This information does not purport to be a complete description of the developments referred to in this material. Links are being provided for informational purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members.

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