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What is Frozen Credit?

by on June 9, 2008

“Frozen credit” sounds like such a horrible thing, doesn’t it? It conjures up images of your credit cards being iced over and unavailable for use. But that’s not the case at all. Despite the chilly name, the term is used to describe something that you personally can do to protect yourself from credit card fraud and identity theft. What it refers to is the act of asking a credit bureau to make your credit report unavailable to new lenders. It’s a really simple thing that can serve to make it safer for you to use your credit cards. So how does it work? Basically, you decide that you don’t want your credit report to be available to anyone except yourself, the credit bureaus and the lenders that you already have existing credit card accounts with. This means that people who use credit reports to steal identities will have a harder time making a victim out of you. If this sounds like something that makes sense to you, all you need to do is contact the three credit reporting bureaus one at a time and ask them to freeze your credit account

You will need to make this contact via a written letter to each of the three credit bureaus providing your personal identifying information and your request.

But wait, there’s more that you should know about frozen credit before you do this. While freezing your credit can be a great way to make sure that thieves can’t get in to your credit report, it can also cause you some huge hassles in your life. That’s because there are going to be times that you want other lenders to look at your credit report. Any time that you try to open a new credit card account, apply for an auto or home loan or get a lease on a new apartment, people are going to need to see your credit report to approve you. If you have frozen your credit account, they won’t be able to access this information and chances are that they’re not going to give you the loan.

Of course, frozen credit isn’t a permanent thing. You can always ask that the frozen account be “thawed”. However, it usually takes two or three weeks for each of the credit bureaus to un-freeze the account after you’ve requested that this be done. This means that you’re going to need to plan in advance to thaw the account any time that you’re seeking to get another loan.

If that sounds good to you, there are probably still some questions racing through your mind. The most common question is how this is going to affect your ability to use your credit and establish a credit history. The answer is that it’s not. In terms of your existing accounts, nothing is going to change. You’ll still be able to use your credit cards and the credit card companies will still report your activity (including on-time or late payments) to the credit bureaus. Your existing lenders will still have access to your credit report even during a freeze. Finally, you should be aware that different states have different rules about allowing you to freeze your credit so you’ll need to check about the specifics in the area where you live.

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