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What is a loan freeze: who needs it and why and how to implement it

'14.06.2021'

Olga Derkach

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Loss of wallet or data leakage greatly increases the risk of identity theft. If you are the victim of one of these adverse scenarios, it is advised to protect your personal information by blocking a loan. The edition told in more detail Money.

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The Credit Freeze blocks unauthorized credit checks, making it difficult for criminals to open new accounts in your name and protecting you from fraud, ”says Bobby Rebell, a certified financial planner and personal finance specialist.

Freezing your credit will not magically eliminate existing fraudulent payments, but it will prevent those who stole your information from creating any questionable accounts with your details.

Rebell says it won't affect your credit score. And it won't cost you a cent either: thanks to federal law passed in 2018, three major credit bureaus - Equifax, Experian, and Transunion - allow consumers to freeze and unfreeze their loans at any time for free.

Freezing a loan or blocking a loan

The terms "credit freeze" and "credit blocking" are sometimes used interchangeably, and they do offer the same protections - both allow you to block access to your credit report.

Freezes are free. By law, they must come into force within one business day.

Loan blocking is a paid service and usually requires a subscription from one of the credit bureaus. Locks can be turned on and off instantly. It can take up to an hour to lift the loan freeze.

Should a loan be frozen

Freezing may not affect your credit score, but it does have some drawbacks. This may delay the processing of your loan applications in the future.

“If you are planning to apply for a credit card, mortgage or other financial product that requires a credit check in the next few weeks, there is no point in blocking your loan,” the expert says.

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And while freezing your credit won't affect your credit score, it can still take a while while your credit is frozen - for example, if you miss your credit card payments. You can still use your credit card for purchases while your credit is blocked, so you still have to pay the bill.

In addition, a credit freeze will not automatically solve all the problems associated with theft of your data. Rather, it serves to protect against future fraud and identity theft.

Therefore, no matter what you decide, always keep an eye on your credit card and bank statements. You can also set up fraud alerts at each credit bureau to be automatically notified of suspicious activity.

How to freeze a loan

To block credit, according to the FTC, contact the three national credit bureaus by phone or using their online forms. Here are the details:

Equifax:

Experian

Transunion:

You will be prompted for personal information such as your name, address, date of birth, and social security number. Each credit bureau will provide you with a unique PIN that you will need if you want to unblock your loan later.

How to unfreeze a loan

If you are applying for a loan or opening a new line of credit, you need to unblock the loan.

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You can do this temporarily or permanently, according to Rebella, by contacting the three credit bureaus listed above and providing your unique PIN. For a temporary unfreeze, it may be easier and faster to find out which specific credit bureau the lender will contact and to unfreeze your loan only through that particular agency. If you want to permanently block your loan, you will need to contact all three bureaus.

Please note that you do not need to unfreeze a loan when applying for a job, renting an apartment or insurance, as freezing will not affect the application process for these things.

Who can view a frozen credit report

A credit freeze blocks most people other than you from accessing your credit report, but there are a few exceptions.

Subjects who had access to your credit prior to the freeze, such as lenders, debt collectors, and marketers, will continue to have access.

Also, if you are applying for a job, potential employers can check your credit, but only with your consent.

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