Ruchi Gupta

Why A Credit Freeze Is Better Than A Credit Lock

A credit lock or a credit freeze can prevent criminals from stealing your identity and using your credit data to open accounts in your name.

While both a credit lock and a credit freeze can keep you safe from con artists, it is important to understand the difference between the two.

Credit lock: If you lock your credit report at each of the three credit bureaus, TransUnion, Experian, and Equifax, your data will become inaccessible to lenders.

But what if you want to apply for a new loan or another credit card? It is possible to unlock your account immediately by simply accessing the credit bureau’s website or app. This will make your details accessible once again.

If a credit lock is in place, and someone applies for a loan in your name, the credit bureau will send you an alert. This facility provides an additional degree of security.

Credit freeze: A credit freeze is also known as a security freeze. It serves the same purpose as a credit lock. It stops lenders from viewing your details or obtaining a copy of your credit report.

However, remember that in certain instances, your data is still visible. These exceptions apply to both a credit lock and a credit freeze:

  • An existing lender can see your data. This institution can pass on your information to a debt collector if you are behind on your payments.

  • The credit bureaus can still provide your data to third parties for the purpose of making pre-screened offers.

  • A government agency that has a court order can access your details.

If you want to provide a new lender with your data, it is possible to unfreeze your account. But this will take a few days. Unlike removing a credit lock, unfreezing your account is not instantaneous.

A credit freeze offers greater advantages

Should you opt for a credit lock or a credit freeze? Experts say that a credit freeze provides more protection. When you lock your credit report, you are entering into a contract with the credit reporting bureau. But a credit freeze is covered by state law.

Chi Chi Wu, a staff attorney with the National Consumer Law Center, an organization that works to protect consumer rights, says that if a frozen account is hacked, the account holder will not be liable for any financial loss.

What happens in the same circumstances, if the account was merely locked? According to Chi Chi Wu, “With locks, it’s not clear who would be liable.”

Another expert, Christina Tetreault, an attorney with Consumers Union, holds a similar view. A credit lock’s contract may not be made to favor the consumer.

“Having a contractual agreement is not as strong as having protections under law. The contract may be unclear, may include provisions that allow the other party to change it, or include provisions that you may be better off not agreeing to…” says Christina Tetreault.

Identity theft can expose you to fraud

Many people assume that their data is safe with the credit rating agencies. Unfortunately, that’s not true. A few months ago, thieves accessed the computer systems of Equifax. They stole Social Security numbers, birth dates, and addresses for up to 145.5 million people.

The driving license numbers of many individuals were stolen as well. Alarmingly, the hackers also got away with the credit card numbers of 200,000 people.

While most individuals understand the danger of their credit card number being stolen, many do not realize that it is equally serious if your Social Security number and other personal details fall into the hands of thieves.

Anyone with this data could approach a lender and pretend to be you. If your credit standing is good, the credit bureau would provide a positive report and a loan could be sanctioned in your name. Consequently, you could be saddled with the bills that the fraudster runs up.

When you discover the fraud, it could take weeks or months or even longer to clear your name. You would be repeatedly called by recovery agencies to pay the bills that the fraudster had run up. In addition to the harassment that you face, you would find it difficult to borrow money if you needed it.

Protect yourself with a credit freeze

It is advisable to freeze your account with each of the three credit reporting agencies, TransUnion, Experian, and Equifax. You can always unfreeze it if the need arises. A credit freeze will hide your account from fraudsters and prevent unauthorized new accounts being opened in your name.

There is one more precaution that you must take. Don’t forget to monitor your credit report on a regular basis. If you spot any significant changes or suspicious activity, report it immediately. You should do this even if you have put a credit freeze into place.