Is There a Blemish To Using Credit Freeze?
However, a credit freeze can be used effectively to minimize the risk of identity theft and other unauthorized credit accounts being initiated in one's name. However, freezing your credit also has its demerits that are worth noting down as well before deciding to freeze the credit. In this article, we will understand the benefits and disadvantages of credit freezes, therefore helping you on whether the course of action is suitable for you.
The Primary Benefit: Identity Theft Protection
The major benefit of credit freeze is that it freezes your credit reports and an identity thief as well as any other person can open an account or access a credit report without consent. When a criminal attempts to open a fake account, he or she will not be successful since the credit bureaus will not report a frozen credit report. It can prevent one from falling victim to identity theft or cause major inconveniences trying to clear the name.
Some possible negative aspects should not be overlooked
While fraud protection is the biggest advantage of credit freezes, there are some possible inconveniences you should be aware of:
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Applying for new credit is not as straightforward as other cardholders might expect.
If you wish to apply for any credit or a mortgage, an auto loan, a credit card, and the like, you need to place your credit report out for opening or to use the term ‘thaw’. This can only be done by reaching out to each credit bureau separately and submitting identification documents to have the freeze lifted either fraudulently or permanently. It can complicate the credit application process by prolonging time and increasing the number of steps.
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Additional measures for simple, everyday banking operations
Besides obtaining credit, there are likely several occasions when you need to freeze your credit reports for other usual financial activities. Examples include getting insurance, renting an apartment, signing a lease where the landlord reviews your credit report, opening a new utility account, or any time you get a new phone or phone plan. Whenever it is necessary to check the credit report, more time and energy shall be devoted to unfreezing the freeze.
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Fees May Apply
While it has been the case in the past that freezes came with fees in many states, the federal legislation now makes it free across all the states. Nevertheless, a fee may be charged if you ask for temporary reliefs and changes of the PIN codes required to operate your freeze. Fees, often in the single digits (5-10 dollars), can compound over time. Some states set limits on fees that can be charged to $5 per action regardless of the number of bureaus involved.
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Potential Lender Confusion
When a credit check is attempted while the account is frozen, the lender may become bewildered by the fact that the reports are unavailable immediately. Sometimes this results in credit limelight or rejection if the credit provider does not know that all that the freeze requires is to be lifted. To avoid such delays, it is advised that borrowers ensure that they keep engaging their lenders and providing them with their PIN codes.
- It therefore did not affect the existing fraud.
Last but not least it is necessary to use the credit freeze that makes information in the credit file inaccessible only for the future. It does not erase existing fraud or bad debts that are still active and affecting your history in case identity theft has occurred. Thus, to resolve the issues with the current credit reports, you would need to put a fraud alert or follow the dispute procedure to affect the history.
The Decision on Credit Freezes: Cost-Benefit Analysis
- Credit freeze: As you can see, credit freezes offer incredibly beneficial identity theft protection but need a pinch of extra care and time. It is not a clear black or white, yes or no type answer – it all depends on your circumstances.
- For many applicants: the security gains from having a frozen credit hinder outweigh the minor disadvantage of having to jump through some additional hoops when applying for credit. Credit freezes can be impractical for others due to the complexity involved and the possible delays implied by the procedure.
If you have been the victim of identity theft and/or you are at high risk, then a freeze is going to be the best thing you can do to prevent further fraudulent activity. On the other hand, if you do not get new credit often and are not a victim of fraud, it may not be worth it to try to make changes to meet the requirements of a freeze.
One way is to make sure you regularly monitor your credit reports and be on the lookout for such fraudulent activities. It will allow you to identify and remove fraudulent accounts faster rather than having them active and creating even larger issues. It’s also important to monitor credit card and banking statements more often as well since the faster you notice the charges made by the criminals the better.
This way, if you have a clear conception of the benefits and possible troubles connected with credit freezes, you will be able to draw the best conclusions about how to protect your identity and financial credibility. It is, therefore, necessary to weigh if the protections offered make the inconvenience we are about to face worthwhile.
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