What is a credit freeze? Definition and meaning

The term ‘credit freeze’ has two meanings. It may refer to when the government forces banks to stop lending completely, or when a person can control how a US credit bureau is able to sell his or her data. With the latter meaning, it is also called a credit lock down, a credit lock, a security freeze or credit report lock down.

With a credit freeze, the person’s data at the credit bureau is locked until that individual gives permission for the information to be released.

People seeking a credit freeze should be aware that if they take control over who is permitted to access the personal and financial information of their file, this may interfere with, delay or make it impossible for the timely approval of any loan application, rental tenancy agreement, utility provision contract, and several other commercial services.

Credit FreezeWhen you impose a credit freeze, identity thieves cannot use your ID to get loans and sign contracts.

US states recently started introducing laws allowing individuals to impose credit freezes. By 2007, America’s three leading credit bureaus (Experian, TransUnion and Equifax) announced that they would allow consumers across the US to freeze their credit reports, even in states where such laws had not yet been introduced.

Security freeze procedure

When people place a security freeze on their file, they will be given a personal identification number or password to use should they decide to remove the freeze from their file or authorize the temporary release of their credit report data for a specific period or person after the freeze is in place.

If you want to provide that authorization, you will need to contact the credit bureau and present identification, your personal identification number of password, and a statement saying that you have chosen to remove the security freeze from your file.

According to experian.com:

“A security freeze generally does not apply to circumstances in which you have an existing account relationship and a copy of your report is requested by your existing creditor or its agents or affiliates for certain types of account review, collection, fraud control or similar activities.”

A credit freeze is a useful tool to prevent entities with whom you have no existing business relationship or account from gaining access to your credit file (until you lift the freeze).

You are also less likely to become a victim of credit-related identity theft if nobody, or just a specified list of people and companies, have access to your personal data.

Credit freeze does not block everybody out

When you place a security freeze on your credit report, there will still be some entities that have access to your data.

Anti-business identify theft organization, businessidtheft.org, wrote:

” The placement of a security freeze on your credit report does not prevent those with whom you have an existing account, or a collection agency acting on behalf of the existing account, from accessing your credit report for the purpose of account maintenance, reviewing, monitoring, considering credit line increases, account upgrades and enhancements, or collecting on a delinquent account.”

Your personal data may still be accessed for the purposes of pre-screened credit and insurance purposes, even if you have a security freeze. Law enforcement agencies also have access when conducting criminal background checks.

Government agencies may obtain your personal data when investigating matters such as taxes, child support payments, or medical fraud.

According to Cambridge Dictionaries Online, a credit freeze is:

“A ​situation in which ​actions by a ​government ​force ​banks to ​stop ​lending ​money,” or “a ​service that ​allows ​consumers to prevent ​credit ​bureaus from ​selling the ​information in their ​files. Credit ​freezes are used for preventing ​identity ​theft.”

Video – Credit freeze

In this CreditCard.com video, the presenter explains what a credit freeze is, and how it can protect you from identity theft.