NOTE: Due to the recent SSN breach in August 2024, we have written a supplementary article with detailed steps on how to freeze your credit report at Experian, TransUnion and Equifax. You can find that article here: https://simplefinancebytes.com/2024/08/21/how-to-freeze-your-credit-reports-at-transunion-equifax-and-experian-a-step-by-step-guide/
You may also already have access to a free identity theft monitoring service and you can find more information at this linked Nerdwallet article: https://www.nerdwallet.com/article/finance/identity-theft-protection-you-may-not-know-you-have
Protecting your financial identity is more crucial than ever. Breaches and scams are on the rise, and a compromised identity can wreak havoc on your credit score and finances. One of the most powerful tools at your disposal is a credit freeze.
Shielding Yourself from Fraudsters
A credit freeze acts like a lock on your credit report. By placing a freeze with all three major bureaus (Experian, Equifax, and TransUnion), you significantly limit access to your sensitive financial information. This makes it much harder for criminals to open new accounts in your name, curbing their ability to rack up debt and damage your credit. You can do this for free today either online or by calling their toll-free numbers. We recommend doing it online because you will set up online accounts with each bureau that will then allow you to unfreeze or thaw your reports temporarily when you want to in the future.
Understanding the Hard Inquiry Hit
A hard inquiry is a formal request for your credit report, typically initiated by a lender when you apply for a loan or credit card. While occasional hard pulls are normal, multiple inquiries in a short period (like those from car dealerships) can be seen as a sign of financial stress by credit scoring models, potentially lowering your score. A lower credit score can translate into higher interest rates and difficulty qualifying for loans. Freezing your credit reports prevents hard pulls from happening without your explicit authorization.
Keeping Car Dealerships in Check
Beyond the threat of fraudsters, a credit freeze can also be your shield against unscrupulous car dealerships. When you shop for a car, dealerships often run a “hard inquiry” on your credit report to determine your interest rate. While a single inquiry has minimal impact, multiple hard pulls within a short time frame can bring your credit score down. A freeze ensures dealerships can’t access your report without your permission, putting you back in control of how your credit is accessed. Not that we recommend you never let a dealership handle your financing. You should arrange financing with a local credit union or bank before you ever speak to a dealership about buying a car. The only number the dealership should be talking to you about is the final sale price of the vehicle.
Taking Action: Freeze Your Credit Now
Freezing your credit is a simple process. Each bureau has an online system or a toll-free number to initiate a freeze. The best part? Freezing your credit is now free in all states. There should be no fee to temporarily lift the freeze if you need to apply for new credit. If a bureau tries to charge you a fee, report them to your state’s Attorney General as well as the Consumer Financial Protection Bureau.
While a credit freeze isn’t a foolproof solution, it’s a powerful tool in your identity theft and credit score protection arsenal. By taking this proactive step today, you can safeguard your financial future and ensure you’re in control of your credit information.