Evaluating credit is a popular method that is often employed to minimize the risk of identity theft and the opening of fake accounts in your credit file. However, some people have concerns that they may not do it because their credit score will be affected. However, in this article, we will be able to find out the truth about whether or not freezing your credit score does lead to it decreasing.
Freezing Your Credit: What Does It Mean?
To freeze your credit, one needs to apply for a security freeze with the three credit reporting agencies, namely Equifax, Experian, and TransUnion. This freeze only lets you, and, yes, those with a legitimate reason for needing your credit report – like a potential employer – see it. If a person tries to take credit in your name then the credit provider cannot get your credit report and therefore will not approve the credit. This makes it difficult for identity thieves to open other fake accounts in the name of the real identity that they have stolen.
There is a method to freeze credit reports when you wish to do so and unfreeze them when you desire to apply for credit or any other valid reason requiring the credit check. However, the freeze remains in effect to help keep your reports secure, whether this is at the end of a normal working day or any other time. Freezing and unfreezing one’s credit is usually free and can be done with one click on the internet or by sending the application through post.
Does Freezing Your Credit Scores Result in Drop-In Credit Scores?
No, freezing the credit reports to prevent identity theft will not lead to a dip in your credit score directly. Here's why:
Credit freezes limit the use of your credit reports and stop the process of new credit activity from reporting. However, your credit history on which your score depends remains the same or gets reflected in the credit report. As long as you are on the right side of the credit law, you are not making late payments or having high balances, your scores should remain the same when your reports are frozen.
Even more to the point, credit analyst John Ulzheimer points out that the majority of credit scores – more than 90 percent – is made up of two factors: your payment history and the amount of credit used compared to the amount of credit available. This segment is constituted by new credit applications that account for less than 10%. So, as long as you do not apply for or open many new credits, having a freeze to your reports should not change your score even if it is long-term.
There is also a difference between a credit freeze and a fraud alert that must be taken into consideration. During a fraud alert, your credit reports are open to creditors, but they get a message that the consumer is a possible identity theft victim. Alerts of fraud do not affect your credit score in any way.
Is It Possible For Your Credit Score To Drop After Applying For A Security Freeze?
While simply placing a freeze on your credit won’t directly lower your score, there are a couple of indirect ways that your credit score could potentially decrease after freezing your reports:
- During freezing, if you apply for credit you get a lower VantageScore on your reports. This type of credit scoring rewards or punishes individuals based on their activity status and in the credit report, people may not be active while their credit is frozen. Nevertheless, this should not impact your ‘base’ FICO score that most of the lenders employ in the United States.
- This is because when you are not able to build credit for a long time, small drops can sometimes occur in the FICO scores. While the length of credit history is more favorable for those who have multiple accounts, accounts with few reports or with little recent use can be impacted by an extended freeze preventing new activity.
However, such a minor dip is not very frequent when one has placed their credit freeze. And the security protection you receive might be more valuable than the slight hit to your credit score. The importance of monitoring your scores and periodically unfreezing to apply for credit also prevents negative impacts on the credit score.
Freezing your credit refers to the act of putting a freeze on your credit report to prevent unauthorized access to it by entities that you are not authorized to access.
Paying for credit monitoring services is rather costly, however, freezing your credit report is one of the best ways to minimize the chances of identity theft. They do not reduce your credit score either directly but some factors do these in the process. Any small dips that can occur are typically offset by the advantage of the freeze in terms of security.
If you become an identity theft victim, it’s advisable to place a freeze on your credit with the three major credit bureaus Equifax, Experian, and TransUnion as soon as possible. This helps to prevent further access to the credit accounts in question and will help in resolving identity theft.
It is also important to know that you can take both credit freeze and fraud alert as preventive measures. A general freeze offers greater security to accounts than a fraud alert as the latter is less complicated to immediately turn on and off when necessary. Evaluate your tolerance for risk, credit requirements, and proximity to initiate credit freeze as a measure that is suitable for your case.
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