Will Consumers Warm Up To The Credit Freeze Laws?

Last week the Consumerist had an article mentioning that Transunion will let you freeze your credit report so you may protect your credit from imposters. Recent laws in this direction go a step beyond and require all the credit bureaus to let you freeze your credit report. In Texas the law went into effect on September 1st. Since then I have had it on my “TO DO” list to look up more information and consider the possibility of freezing our credit reports. During the past couple of days, triggered by the Consumerist article, I finally got around to investigating it further. And the more I read about it, the less inclined I am to take any action :(

Quoting from the Consumer Union website here is how it works –

A security freeze lets consumers stop thieves from getting credit in their names. A security freeze locks, or freezes, access to the consumer credit report and credit score. Without this information, a business will not issue new credit to a thief. When the consumer wants to get new credit, he or she uses a PIN to unlock access to the credit file.

That sounds great to me! Currently this law is in effect in all but 11 states. (States that do not have this law are Alabama, Alaska, Arizona, Georgia, Idaho, Iowa, Michigan, Missouri, Ohio, South Carolina, and Virginia).

On more detailed review however, it seems like this may be yet another law that offers lip service to the consumer but in reality makes him jump through so many hoops that probably no many will actually use it :( The exact details of the law vary from state to state. However, looking through the overview, it seems like in most states, unless you are a victim of identity theft already, you need to pay anywhere between $5 to $20 to each credit reporting company for each operation such as placing the freeze, lifting the freeze temporarily or removing it all together. In addition, the response to your requests is not immediate and there is a possibility that you will have to wait while your credit report thaws (so to speak) when you try to lift the freeze. Whats worse, it is not really frozen from everyone. It is possibly a small price to pay to protect yourself from having to go through the harrowing experience of identity theft, but over a term of several years, those fees could really add up and moreover, I am not at all thrilled about the delay in being able to access my credit or selective access to my credit!

From the Instructions for using Texas’s security freeze law fact sheet,

Can a creditor get my credit score if my file is frozen?

No. A creditor who requests your file from one of the three credit bureaus will only get a message or a code indicating that the file is frozen.


Can an employer do a background check on my credit file?

No. You would have to lift the freeze to allow a background check, just as you would to apply for credit. The process for lifting the freeze is described above.

I would assume for the zillion other places where we use credit checks (e.g., apartment leasing, insurance, getting a store card etc) also, these would be true.


Can anyone see my credit file if it is frozen?

When you have a security freeze on your credit file, certain entities still have access to it. Your report can still be released to your existing creditors or to collection agencies acting on their own behalf. They can use it to review or collect on your account. Other creditors may also use your information to make offers of credit. Government agencies may have access for collecting child support payments or taxes or for investigating Medicaid fraud. Government agencies may also have access in response to a court or administrative order, a subpoena, or a search warrant.

What?? I have marked the part that bugged me the most in bold italics. So my credit is hidden from creditors and employers, but the credit mongers still get to access my credit information and can keep bombarding me with offers??? That just doesn’t sound right.

In addition,

Do I have to freeze my file with all three credit bureaus?

Yes. Different credit issuers may use different credit bureaus. If you want to stop your credit file from being viewed, you must freeze it with Equifax, Experian, and Trans Union.

To protect my credit, does my spouse’s credit file have to be frozen too?

If Texas is a community property state, then yes.

Based on Texas fees, that means I have to spend $60 to put both the better half’s and my credit on freeze. And every time we want to unfreeze it, its another $10 per person, per credit bureau. I can almost hear the leak in my wallet go drip, drip, drip.

But here’s the part that made me decide that this is probably not worth it. From the website,

The freeze goes into effect five (5) business days from receipt of the consumer’s letter (by certified mail) by the credit reporting agency.

How long does it take for a security freeze to be lifted?

Credit bureaus must life a freeze no later than three (3) business days from receiving your request.

To me that feels like snails pace! In a world running at the speed of light, who wants to wait for three business days to lift the credit freeze?

There is one more thing that needs to be considered. Freezing your credit prevents someone from obtaining credit in your name, but it does not prevent someone who has already got hold of your information from cleaning out your bank account and piling up a mountain of debt on your existing open credit accounts. Consumers should be aware that while freezing the credit can offer some benefits, it is not a be-all end-all solution.

So frankly, I am not sure if this law will really be helpful to me – a consumer. I would love to put a freeze on my credit and protect me and my family from being victims of identity theft. But I don’t know if the 3 days needed to lift the freeze will mean I will lose out on some good offers. Maybe its my recent experience that is making me so skeptical. I found out just before the end of last month, that my credit union was offering a very low promotional low APR till the end of the month for auto refinancing. I immediately made a phone call and switched my loan. It saves me quite a bit of money in the long run. Something like that would not be possible if I place a freeze on my credit. In this particular example, I would have to first contact my credit union to find which credit reporting service they will use, and then contact that agency to lift the freeze. After the credit reporting agency receives the notification it would take them 3 days to lift the freeze. That is too much time, and by then I would probably no longer be able to avail the low rates. In addition to the hassle, the pesky fees really bug me. Frankly, I have no idea where and how my credit gets used and not really sure if I want to agree to shelling out $10 here and $12 there every now and then, because I went and put a freeze on my credit!

So, what do you think? Will you freeze your credit (if your state offers the option) or will you wait and watch to see how things go?

You can find out about the exact details of the law for your state here.

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Rebecca said...

You can get a comparable effect by putting a fraud alert onto your own report, and that doesn't cost any money.

ispf said...

Rebecca: Thanks for the information. I will look into putting fraud alert on our reports.

DR said...

This is a good, thorough analysis. I had heard about freezing your credit, but had never checked into it. Based on what you've written, I'll probably pass on it. I did have an alert on my credit through one of the agencies, but it cost me $10 per month and just wasn't worth it.