Released: November 12, 2006

Freezing your credit file

Source: By Aleksandra Todorova, SmartMoney

Call it post-traumatic stress: For victims of identity theft there’s always that nagging feeling that once a thief’s been able to open fraudulent accounts in your name, it’s just matter of time until they do it again.

Now states are enacting laws that offer consumers the ultimate protection: a credit freeze. It basically allows you to have the credit bureaus lock up your file and with it, the ability to get any type of new credit. Whenever someone applies for a credit card or loan in your name, the lender is unable to access your credit score and report, and the application is denied. To date, 25 states have passed some sort of credit-freeze legislation.

Consumer advocates, who have been lobbying for credit freezes for more than 10 years, say that’s the only guaranteed way to prevent identity theft. But the credit bureaus counter that a credit freeze creates inconveniences that, for most people, may not justify the benefit.

“While there might be some consumers for whom it might be the right solution, for many there are other remedies to prevent identity theft before pursuing the extreme measure of putting a freeze on your file,” says David Rubinger, a spokesman for Equifax, one of the three major credit bureaus.

Granted, the credit bureaus have a vested interest in discouraging credit lock-ups: After all, they’re in the business of selling them to creditors. “They don’t like the freezes because they give consumers control over their credit information,” says Ed Mierzwinski, Consumer Program Director of the U.S. Public Interest Research Group, or U.S. PIRG. In addition to that, Mierzwinski says, should credit freezes become the norm, the sales of credit monitoring products — a lucrative and growing part of the industry’s business — is likely to decline.

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