Consumer Protection & Debt Relief

The Credit Freeze; A Proactive Solution

By May 26, 2014No Comments

Consumer credit reporting is the cornerstone to retail borrowing and lending today. What goes on your credit report, how it comes off and what remedies are available are governed by The Fair Credit Reporting Act (FCRA). Despite significant security protections, Identity Theft remains a large problem with substantial economic implications. This year, almost 8.5 million households will suffer an identity theft event with an average loss of $4,900. The problem is much larger than just the average loss. Seven percent of the population is expected to have unauthorized use of an account or utilization of another’s identity to obtain credit with no intent to make repayment.

Some consumers rely on the built in protections from the FCRA. These protection are both proactive and reactive. One of the most effective tools to manage credit which will prevent the unauthorized use of consumer credit by making the consumer the actual gatekeeper is the credit freeze. The Credit Freeze uses a consumer created Personal Identification Number (PIN). Following the freeze concept, the PIN can be used to temporarily thaw the account so new credit can be authorized and all of the protected accounts properly managed by the consumer. During the freeze, your accounts function normally and are not impaired. The Freeze can be used for an indefinite period of time.
When the consumer opens a new account, the PIN would allow that specific creditor access to the consumer credit report. A stranger seeking to gain access to the report or to open a new, fraudulent account, would not be able to due to the PIN requirement by the credit reporting agency.

When someone without authorization tries to open a fraudulent credit account, they do not have the consumer’s PIN. When the credit company goes to access the consumer credit report as part of opening the account, they will not have access and cannot verify any credit information and will know, from the absence of the PIN that this is not an authorized account and no new account will be opened.

One of the problems with the credit freeze involves the charges for self-managing the credit report. These charges, with an active credit profile, can tend to be excessive, but they are the most effective form of identity protection. The credit freeze protection works well for anyone who thinks there maybe be someone with the consumer’s vital information. With the current problem with identity theft, the credit freeze works for all consumers but does require active involvement and some tolerance for reoccurring charges.

Each of the big three consumer reporting agencies have different rules, regulations and fees for freezing and thawing the credit reports. This information can be gleaned from their respective websites. Using the credit freeze process insures the integrity and security of your credit report only as long as the PIN is secure. Make sure to protect your PIN as well as your other information such as your driver’s license number and the social security number.