By Herb Weisbaum ConsumerMan
msnbc.com contributor
updated 12/18/2008 3:03:59 PM ET 2008-12-18T20:03:59

I finally did it. This week I put a security freeze on my credit files at the big three credit reporting companies: Experian, Equifax and TransUnion. I know this won’t stop all identity theft, but it will make it harder for a thief who steals my personal information to get a credit card, open a bank account or start cell phone service in my name.

All three companies let you place the freeze online. You can also do it by mail. It was easy and took less than five minutes. I was even able to create my password/PIN code. I’ll need this if I ever want to thaw my account.

A security freeze tells the credit reporting companies I do not want them to release information from my file to anyone. Without access to my file, a lender is unlikely to grant credit to someone pretending to be me.

If I want to buy a car, rent an apartment or apply for a new credit card I'll need to use my  PIN code and pay $10 per credit bureau to temporarily thaw my account, but it seems a small price to pay for the added security.

“If anyone is worried about the prospect of identity theft scrambling their financial situation and messing up their lives, there is no better thing you can do than freeze your credit report,” says Joe Rideout with the advocacy group Consumer Action.

The price to place the freeze varies from state to state.  It ranges from free (for people in Colorado, Indiana, New Jersey, New York and South Carolina) to $20. Most states set the fee at $10. Right now, TransUnion waives the fee if you request a freeze online.

If you are the victim of identity theft — and can prove that with a police report — your freeze is free. And in 10 states, seniors can freeze their credit files for free.      

The charge to thaw an account temporarily or permanently varies from state to state.  Currently, TransUnion will unfreeze an account for free.

Benefits and downsides
Linda and Jay Foley have a security freeze on their credit files. The Foleys, who live in San Diego, were both victims of identity theft. They founded the Identity Theft Resource Center to help prevent this crime and help those hurt by it.

Linda believes a credit freeze “has a lot of benefits.” Even so, she admits it “can be a little bit burdensome” in situations where you need an immediate credit check, such as buying a car or applying for credit.

Because I don’t have plans to do any of those things in the foreseeable future, a freeze works for me.

While a permanent thaw can take up to 3 days, a temporary thaw — to allow a specific company to access my file — can happen more quickly.  Fifteen states require a temporary thaw within 15 minutes if requested electronically. Experian and TransUnion tell me they normally process all temporary thaw requests in that time frame. Equifax says it hopes to have this quick online thaw capability in place for all 50 states by early next year.

What a security freeze does not do
A freeze does not stop creditors from reporting to the credit bureaus. So negative information, such as late payments, will still show up and could have costly consequences. A lender could find out about those late payments and bump up your interest rate.

Existing creditors and their affiliates will still have access to your files.

A security freeze will not stop those pre-approved credit card offers. If you want these mailings to stop, you need to opt-out. You can do this online at http://www.optoutprescreen.com/ or by phone 1-888-567-8688. You will need to give your Social Security number. You don't need to worry about that, since you initiated the call.

Most importantly, a security freeze won’t stop an ID thief from doing things with your personal information that do not require a credit check. It won’t keep someone who steals your existing credit or debit card number from using it to charge merchandise. Someone who snags your Social Security number might still be able to get a driver’s license or other government ID in your name or access your medical files.  

So even with a security freeze in place you need to be careful with account numbers — keep shredding those documents — and check your monthly financial statements. You also want to get a free copy of your credit reports from each of the big three bureaus once a year to check for suspicious activity.

What about credit monitoring?
As data breaches become more common, credit monitoring has become increasingly popular. These services, offered by the credit bureaus and other companies, send you an e-mail alert when certain suspicious activities show up on your credit report, such as a credit inquiry, a new account or a change in your credit limit.

Consumer groups generally advise against spending the $12 to $15 a month for monitoring. Joe Rideout at Consumer Action calls credit monitoring “a nearly worthless product” that does nothing to prevent ID theft. “It’s like buying life insurance after the body is cold,” he says.

The editors at Consumer Reports agree. They say credit monitoring “offers limited protection” because it can take as long as 60 days for a fraudulent account to show up in your file. You can monitor your credit card or bank accounts for online yourself — for free — to look for questionable activity.

If you do want to monitor your accounts, you can do it online yourself — for free.

Credit freeze vs. fraud alert
Why not just put a fraud alert on my credit file? It’s free, but it’s only good for 90 days. And by law, you must have a bona fide reason for requesting a fraud alert; for instance someone stole your wallet.

A fraud alert tells potential lenders to verify the identity of any applicant because you think you could be the victim of identity theft. If you can prove someone did steal your identity, you can have that fraud alert extended for seven years. But it’s still not the same as a freeze.

“Fraud alerts are not the best way to protect yourself,” says Jeff Blyskal, senior editor at Consumer Reports. “Sometimes creditors will not look at that fraud alert or they’ll ignore it and open the account anyway. The absolute best way to protect yourself is with a credit freeze.”

The Bottom Line
The security freeze is a relatively new tool in the fight against identity theft. Clearly it’s not for everyone. Shutting off access to your credit history can be inconvenient. You can’t get a loan, job, utility service, or rent an apartment without a credit check.

For me, it’s worth $30 to put a padlock on my credit files. If I need to spend $10 to $30 more to unlock them in the future, so be it. It’s cheaper than spending $15 a month for a monitoring service and in my mind, more effective.

I’ll see how it goes. I promise to let you know if I encounter any unexpected problems.

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