Credit Freeze

Georgia consumers can place a freeze on their credit for $3 per credit reporting agency (CRA). For the nominal fee, you can lock your credit records and select a secret code that you can use to temporarily lift the freeze or “thaw” your credit. This added layer of security means that thieves cannot do anything with your personal information if they are able to obtain it.

A freeze aims to stop fraud before it starts by restricting access to your file and forcing most lenders to deny credit to the criminal applying for it. This is far more effective than fraud alerts or credit monitoring services, which only informs you after a crime has been committed. Because potential thieves have many ways to access your personal information, placing a freeze on your credit prevents someone other than you from establishing new credit in your name.

Credit freezes were first established in California in 2003 as a means to curb identity theft. As of late 2007, the three major credit reporting agencies offer credit freezes for consumers regardless of state legislation; however, fees vary per agency with the average freeze costing $10.

Georgia’s law also offers the unique option of a temporary “thaw” that would allow consumers to apply for on-the-spot credit. Temporary thaws can be done by phone or online and should allow consumers to access their credit records within 15 minutes. Each thaw also incurs a $3 charge for each agency—a total of $9 for all three reporting agencies.

About ID Theft

The Federal Trade Commission (FTC) estimates that as many as 9 million Americans are victims of some form of ID theft each year. The FTC categorizes three main types of ID theft:

Existing Credit Card Only—the misuse of one or more of a victim’s credit cards happens when a thief steals a credit card number or credit card and makes charges without the account holder’s knowledge. This was initially called fraud; however, the FTC now categorizes this as identity theft. While this categorization makes misuse of a credit card the most common form of identity theft, fortunately, it is one of the easiest to resolve.

Existing Non-Credit Card Account—the misuse of a victim’s existing accounts, such as a checking or savings account or utility account.

New Accounts & Other Frauds—the use of a victim’s identity to establish new accounts. This form of theft is less common as only 15% of all identity thefts, representing 1.8 million Americans, are new account fraud. However, new account fraud is often the most damaging and incurs the most out-of-pocket expense for the victim. Victims of this type of theft also have an increased chance of being harassed by collection agencies, being denied new credit or, at worst, being arrested.

While these numbers might be shocking, it is equally important to note that of all the FTC’s identity theft complaints, more than half of the victims did not follow through with each credit reporting agency to place a fraud alert on their account. Nearly 62% of victims did not contact a police department.

What Can You Expect with a Credit Freeze?

Credit freezes are a step beyond fraud alerts. Fraud alerts are statements that appear on your credit report that state you are a victim of fraud, and asks the business pulling your credit report to contact you before granting credit in your name. Credit freezes prohibit lenders from accessing your credit file; therefore, forcing the lender to deny credit if a thief were to try to use your personal information.

A credit freeze does not affect your credit score, nor does it keep you from getting your free annual credit report or from buying your credit report or score. Companies you currently do business with, such as your mortgage lender or utility company, will still have access to your credit records. However, should you want to apply for instant credit at a store, you would first need to thaw your account.

Additionally, credit freezes do not prevent unauthorized use of your existing accounts or other personal information.

How to Place a Credit Freeze

You will need to place a freeze at each of the three CRAs for a fee ($3 each in Georgia). For seniors age 65 and older or for victims of identity theft the fee is waived. Victims must provide a copy of the police report or other proof documentation of their theft. When you place a freeze on your credit, you establish a secret code or personal identification number that allows only you to thaw or remove the freeze.

Initially, credit freezes needed to be established by certified mail, but each credit agency has recently established both phone and online methods for initiating a freeze.

Below is a table of the three major credit reporting agencies and their contact information.

Bottom Line

Credit freezes are an effective tool in curbing identity theft. It is important to note that a credit freeze does not prevent thieves from using your existing credit cards or bank accounts. There may also be some accounts that an ID thief could open that do not require a credit check. Additionally, if an identity theft is occurring when you place the credit freeze, the freeze will not stop it.

The best way to minimize the damage to your credit is to monitor it by checking your credit annually at www.annualcreditreport.com/. You should also check your credit card statements and bank balances online weekly. Any fraudulent activity should be reported immediately to your credit card company as well as the three credit reporting agencies. For more information regarding this topic, please contact Henssler Financial at 770-429-9166 or experts@henssler.com.

Disclosures

This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.