Editorial · September 19, 2017
Credit Freeze: What Business Owners Should Know
A credit freeze locks your credit report so that new lenders cannot see it. Most lenders must look at your report before they open an account. If they cannot, a thief who has your Social Security number has a much harder time borrowing in your name. The Federal Trade Commission also calls this a security freeze.
The topic is in the news for a clear reason. On September 7, 2017, Equifax said criminals had reached files holding data on about 143 million U.S. consumers. Owners who borrow in their own name or sign personal guarantees for company credit have a reason to care, because a stolen identity could reach those accounts.
What a credit freeze does
A freeze restricts access to your credit report. A lender who wants to approve a new loan or card usually checks the report first. With a freeze in place, the lender cannot see your file, so it may decline to extend credit.
The FTC says a freeze does not change your credit score. It also does not stop you from getting your free annual credit report.
What the Equifax announcement said
Equifax said the unauthorized access happened from mid-May through July 2017 and that it found the problem on July 29. The data taken mainly included names, Social Security numbers, birth dates and addresses. In some cases it also included driver's license numbers. The company said it also saw credit card numbers for about 209,000 U.S. consumers and dispute papers for about 182,000.
Equifax said it saw no sign of access to its core consumer or commercial credit reporting databases. It set up a website, equifaxsecurity2017.com, and offered a free monitoring product called TrustedID Premier for one year. That offer includes the ability to lock and unlock an Equifax credit report.
How to place a freeze
You must contact each of the three nationwide credit reporting companies. A freeze at one does not carry over to the others. The FTC lists these phone numbers.
- Equifax: 1-800-349-9960
- Experian: 1-888-397-3742
- TransUnion: 1-888-909-8872
Expect to give your name, address, date of birth and Social Security number. Fees vary by where you live, and the FTC says they commonly run from $5 to $10. Each company then mails a confirmation with a unique PIN or password. Keep it somewhere safe, because you will need it to lift the freeze.
How to lift a freeze
In most states a freeze stays in place until you ask the company to lift it for a period or remove it. In a few states it expires after seven years. A company must lift a freeze no later than three business days after it gets your request.
Plan ahead. If you are applying for a loan, a lease or a job, you will need to lift the freeze first. You can lift it for a set time or for one party. If you know which company the lender will call, you can lift the freeze only there and save on fees.
Business owners should think about timing. A bank loan, an equipment lease or a landlord's credit check may all pull a personal report. Lift the freeze before you apply, not on the day of the meeting.
What a freeze does not cover
A freeze does not stop a thief from charging your existing accounts. You still need to read your bank, card and insurance statements for charges you do not recognize. Your existing creditors and debt collectors working for them can still see your report. Government agencies can reach it with a court or administrative order, a subpoena or a search warrant.
A freeze also does not stop prescreened credit offers. To stop those, call 888-5OPTOUT (888-567-8688) or use the website run by the credit reporting companies.
The FTC guidance is written for people and their own credit reports. If you use personal credit for company purchases, keep reading your statements for those accounts too.
Freeze or fraud alert?
A fraud alert is a lighter tool. The FTC says it lets creditors see your report as long as they take steps to verify who you are, such as calling a phone number you gave. An initial fraud alert protects your credit from unverified access for at least 90 days. A freeze locks the file down, while an alert asks lenders to check first.
If you are worried about identity theft but plan to borrow soon, an alert may fit better. If you want the firmest barrier and can handle the lift steps, a freeze is stronger. Either way, keep watching your statements.