The Why & How of Credit Freezes

One of the primary ways people fall victim to financial fraud is from someone stealing their personal data and secretly opening credit in their name. The best safeguard against this is by placing a permanent credit freeze with the three primary credit bureaus TransUnion, Experian, and Equifax. In order to open new credit, a review of your credit file is required. Therefore, if your credit report is locked, third parties will not be able to issue credit. Initiating a credit freeze is easy to do online but can also be completed by postal mail and phone. Follow these easy steps to get started.

  1. Establish an account with each of the three credit bureaus:,, This is free of charge.
  2. Once registered, elect to freeze your credit data. You can set this up as a temporary freeze or as a permanent freeze.  This is also a free service and will not affect your credit score.

While a temporary credit freeze is an option, my preference has always been a permanent freeze.  With a permanent freeze, you can easily lift the freeze temporarily if needed when applying for credit or a loan. When lifting the freeze temporarily, the credit bureaus provide an option to have the freeze automatically reinstated on a date of your choosing, such as thirty days later. A permanent credit freeze can significantly reduce the likelihood of unauthorized credit being opened in your name. If you have minors, a security freeze on their credit reports is a great tool to restrict fraudsters from applying for credit and taking out loans in their name.

For credit you already have, such as credit cards, a great security feature is transaction alerts. Transaction alerts are customizable and will notify you when transactions exceed your set trigger limits, such as transactions reaching a certain dollar threshold. For example, I set my alerts for all transactions above $20. When I leave the grocery store, I get a ping to my cell phone notifying me of the charge amount and where the card was used. By combining these two strategies, you will go a long way towards protecting yourself against fraudulent activity.

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Stewart H. Welch, III, CFP®, AEP, is the founder of THE WELCH GROUP, LLC, which specializes in providing fee-only investment management and financial advice to families throughout the United States.  He is the author or co-author of six books, including 50 Rules of Success J.K. Lasser’s New Rules for Estate, Retirement and Tax Planning- 6th Edition (John Wiley & Sons, Inc.); THINK Like a Self-Made Millionaireand 100 Tips for Creating a Champagne Retirement on a Shoestring Budget. For more information, visit The Welch GroupConsult your financial advisor before acting on comments in this article.



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