When someone uses your credit card without authorization or attempts to steal your identity, there are things you can do to stop the fraud in its tracks and take corrective action to reclaim your credit and repair the damage.
At Addition Financial, our members often ask us the difference between a credit freeze and a credit lock. Since these two terms are sometimes used interchangeably, it’s easy to become confused.
We want you to know what your options are and when to use each one. We have compiled some information to help you understand the differences between a credit freeze and a credit lock, including when to use each, how to use them and how to decide which option is best for you. Here’s what you need to know.
What is a Credit Freeze?
A credit freeze is a way of protecting your credit reports and identity if you suspect there has been fraudulent activity. You may put a freeze on your credit with all three of the major credit bureaus at any time.
The Economic Growth, Regulatory Relief, and Consumer Protection Act gives every consumer the right to freeze their credit and place a fraud alert on their accounts for a full year. You may place a freeze on:
- Your own account
- The account of any dependent child under the age of 16
- The account of anyone for whom you have a power of attorney (for example, an aging parent)
- The account of anyone for whom you act as a guardian or conservator
The credit bureaus have 24 hours to place the freeze after you notify them. At the time you notify them, you will choose a PIN that you will need when the time comes to “thaw” your account.
Putting a freeze on your accounts is free. Once your accounts are frozen, no potential creditor will be able to view your credit until you remove the freeze.
What is a Credit Lock?
A credit lock is like a credit freeze in some ways but different in some regards, too. You may use a credit lock to lock your credit. A credit lock is most commonly used as a preemptive measure to protect your credit and identity even if no fraud or theft has taken place.
The biggest difference between a credit freeze and a credit lock is that credit freezes are governed by federal law and credit locks are not. In other words, a credit freeze is a right and a credit lock is a commodity.
Each of the three main credit bureaus offers a credit lock program. Two are free and one is bundled as a product. They include:
- TransUnion’s TrueIdentity brand administers a free credit lock product together with other features. When you sign the service agreement, you will be agreeing to an arbitration clause and class action waiver and be signed up to receive marketing materials from TransUnion.
- Equifax also has a free credit lock product. Lock & Alert does not include an arbitration clause or a class action lawsuit waiver. According to Equifax, their intention is to keep the credit lock free for life.
- Unlike the other two credit bureaus, Experian charges a fee for its credit lock, which is bundled with other services. They have tiered options, with the least costly being IdentityWorks Plus for $9.99 per month. It includes the credit lock, account alerts and identity theft insurance. Like the TransUnion product, it includes both an arbitration clause and a class action waiver.
The biggest benefit of a credit lock is that you can lock and unlock your accounts at will. That means if you want to allow a lender to access your reports, you can unlock them briefly and lock them again after the lender has obtained your credit report.
Credit Freeze vs Credit Lock
Because the terms “credit freeze” and “credit lock” are sometimes used interchangeably, they can be confusing for consumers. Financial expert Lisa Torelli-Sauer of Sensible Digs offers these pointers to help you differentiate and decide which option is best for you:
- A credit lock is easier for consumers to remove than a credit freeze. Most credit locks can be removed using your mobile phone or a computer, whereas a credit freeze must be unlocked using a special PIN that has been registered at the credit reporting agencies.
- Some credit bureaus charge a monthly fee for a credit lock, whereas all three credit reporting agencies will freeze your credit for free.
- Whichever option you choose, it’s important to ensure that all three credit reporting agencies – Equifax, Experian and TransUnion – have been notified.
That last point is an important one. Every potential creditor has a preferred credit agency. Some may order reports only from Equifax, while others may prefer Experian or TransUnion. The only way to be sure that your credit is locked or frozen is to include all three bureaus in your request.
How and When to Freeze Your Credit
When should you freeze your credit? The short answer is that if you have any reason to believe that your credit has been compromised, a freeze is the best way to prevent anyone from damaging your credit. In other words, a credit freeze is usually reactive.
To freeze your credit, you will need to contact each of the three credit bureaus independently. You will get a PIN from each and it’s essential to keep these numbers in a safe place because you will need them to thaw your credit.
Keep in mind that the credit bureaus have 24 hours to freeze or thaw your account. You’ll need to monitor your credit card statements and review your credit report and report any fraudulent activity. A freeze won’t do anything to correct your report.
How and When to Lock Your Credit
Credit locks offer preemptive protection against identity theft and credit card fraud. If you have not experienced any issues with identity theft or credit card fraud but want to take steps to prevent these issues, then a credit lock is the best option.
To lock your credit, you will need to enroll in the credit lock program at each credit bureau. The only way to be fully protected is to enroll in all three programs. As noted above, Experian charges a fee for credit locks and the least expensive bundle costs $9.99 per month. For some people, the small expense is a worthwhile tradeoff for the peace of mind they get in return.
If you do decide to use a credit lock, then the default should be having your credit locked. You can access your account online or via a mobile app and unlock your credit if you intend to apply for a credit card, car loan or mortgage. It will be your responsibility to remember to unlock and relock your credit after the lender gets the report they need.
Is a Credit Lock or a Credit Freeze Right for You?
If you have experienced any type of credit fraud or identity theft, we recommend freezing your credit immediately. A freeze is the best option because it’s free to do and it offers federally-mandated protection. These things offset the minor inconveniences associated with credit freezes, mainly the time required to freeze and thaw your accounts.
As we mentioned above, a credit freeze is only the first step if you suspect your credit has been compromised. You’ll also need to review your credit card report and your credit card statements to identify any unauthorized charges or accounts. You should take up unauthorized charges with the financial institution that issued your credit card. They will work with you to remove any fraudulent charges.
If you notice discrepancies on your credit reports, you will need to report each discrepancy to the bureau whose report it appeared on. (There may be variances between reports, so it is essential to review all three.) You may need to answer questions and provide documentation, but it’s important to take this step to clean up your report.
People who experience fraud or identity theft sometimes choose, after they have cleaned up their accounts, to enroll in credit lock programs. Our take on these programs is that if you can afford to enroll, they offer peace of mind and convenience. The ability to log in online or via an app to unlock your credit as needed is certainly something to consider when you’re making a decision about whether to lock your credit.
Your credit reports and credit score are yours to protect. Having compromised credit – whether it’s because of an error or due to fraud or theft – can make it difficult or impossible to get approved for credit cards, car loans and mortgages. It can even impact your ability to get a job in certain industries. Understanding the key differences between a credit freeze and a credit lock will help you to protect your identity.
Are you in the market for a credit card? Addition Financial offers an array of cards, including cards with rewards points, cash back and low interest rates. Click here to apply now.
