Return to The Money Mentor Blog

New credit freeze law: What does it mean for you?

A man uses his credit card during his commute.
June 21, 2018

By Katie Pins

We’ve all been extra worried about data breaches and identity theft lately. It’s easy to feel helpless about these threats but soon we’ll all have access to an additional free level of security.

The new free credit freeze law

In May 2018, the Senate passed a bill that will give Americans unlimited free credit freezes and unfreezes per year. This new law will eliminate fees associated with credit freezes and can provide an extra layer of security. The law is expected to go into effect sometime in September 2018.

Parents are excited about another aspect of the law that will allow parents or guardians of children under 16 to freeze a child’s credit. Currently, this is dependent on the credit bureau and the state. Since children under 16 often haven’t established a credit file yet, the new law will let parents create one through the bureaus and then freeze it.

What is a credit freeze?

Freezing your credit prevents criminals from using your info to access your line of credit. It provides an extra layer of protection by requiring a PIN and “thawing” of credit to open a credit card or loan in your name. The freeze doesn’t impact your credit score.

This protection has a huge upside. However, there are some downsides too. Once you place a credit freeze, also known as a security freeze, you’ll encounter a lot of legwork to lift it. You’ll need to remember the PIN associated with the freeze and contact each credit bureau to lift it. You’ll also find that the “thawing” process could be long, which means you cannot get credit in a hurry.

Finally, a common misconception is that a credit freeze can prevent identity theft. It only disables the criminal’s ability to open new credit accounts, which certainly reduces the impact of fraud on the victim. However, you will need to do more to help protect yourself from identity theft and account takeover fraud.

Who should freeze their credit?

Now that you know the pros and cons, should you place a credit freeze? The answer to that is whether fast credit or security will simplify your life.

If you’re very concerned about identity theft or have had your identity stolen, then a credit freeze is a great tool. You’ll need to sacrifice some conveniences, but it will help you sleep better if you fear identity theft.

Credit freezes can be inconvenient if you’re applying for a mortgage, credit card or personal loan. So, if you know that you’ll be opening one of those products, you shouldn’t place a credit freeze. If you already have a credit freeze, you’ll need to lift it. A credit freeze can take anywhere from 15 minutes to three days to lift/thaw.

Even soft credit pulls -- ones that don’t always impact your credit score-- require a credit lift. The types of organizations that will pull a soft credit check include cell phone companies, a potential employer for a background check, utility companies and credit score report agencies.

How to place and lift a credit freeze

The law that eliminates fees associated with credit freezes does not go into effect until sometime in September 2018. Once you’ve decided that a credit freeze is for you, you will need to contact each of the credit bureaus:

Each credit bureau has slightly different steps to freeze your credit. Regardless of the bureau, you’ll need to have your personal information handy, such as your social security number.

If you find you need to lift your freeze, you’ll need to contact the credit bureaus again. At this time you’ll need to provide your PIN. Currently, there is a fee each time you lift your freeze. After that cost is eliminated, the process will be easier as long as you have your PIN ready.

Other steps to protect yourself from fraud

A credit freeze is just one way to prevent unwanted lines of credit. No one can completely prevent fraud, but there are ways that you can set yourself up for success. It’s important to learn how to protect yourself from computer threats and how to set up automatic alerts on your accounts

Katie Pins is a marketer fascinated with finance. Whether the topic is about the psychology of money, investment strategies or simply how to spend better, Katie enjoys diving in and sharing all the details with family, friends and Money Mentor readers. Money management needs to be simplified and Katie hopes she accomplishes that for our readers. The saying goes, "Knowledge is Power", and she hopes you feel empowered after reading Money Mentor.