Should You Freeze Your Credit After a Data Breach?

With the news of different data breaches coming out on practically a weekly basis, consumers have become increasingly sensitive to the threat of identity theft, often asking how they can avoid it. There is no foolproof defense against identity theft, so one of the best things consumers can do is know how to quickly discover and stop the crime. You can’t completely cut off thieves, but you can make their crimes more difficult to pull off.

You have the ability to freeze your credit files, so no new credit can be opened in your name. Keep in mind this action does more than keep out thieves: With a credit freeze, you’re also putting your credit history out of reach, until you lift the freeze (or, to keep with the metaphor, thaw your credit). It’s a high-maintenance strategy, and even though it’s a strong layer of protection, it doesn’t eliminate your risk of becoming a fraud victim.

Advantages of Credit Freezes

If thieves get a hold of your personal information, they can do a lot of damage. A common type of fraud involves opening accounts under the victim’s name — the thieves get credit cards, buy cars or take out a loan, and when they don’t repay it, the victim’s credit suffers. Until the victim realizes what happens, files a police reports and disputes the accounts, the negative information reported to credit bureaus continues to do damage.

When you freeze your credit, no one can open a new credit card or loan, not even you. Once you need access to your credit, you have to thaw it before a potential lender has the ability to review your application. You can continue to use your existing accounts, and a freeze doesn’t keep you from getting your free credit reports or credit scores. (You can get free annual credit reports on AnnualCreditReport.com and you can check two of your credit scores for free every month on Credit.com.)

The restriction can even help you stay disciplined. A freeze forces you to be more strategic and thoughtful about when you open new credit, because it can take time and money to thaw your credit, which can help you minimize the number of hard inquiries that show up on your credit report. (Hard inquiries are credit reviews made in the course of a lending decision, and they have a small, short-term negative impact on your credit score. Many hard inquiries in a short period of time can significantly hurt your score.)

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Whether you could benefit from a credit freeze after a data breach depends on what information was compromised. If only your credit card information was stolen, getting a replacement card should reduce your exposure to fraud. But when identifying information is accessed, like your Social Security number, a credit freeze could be a smart move.

“A lot of these breaches are a clean sweep — they get credit card information, your Social Security number, your birthday,” said Adam Levin, identity theft expert and chairman and co-founder of Credit.com. “It wouldn’t be a bad idea for people impacted by [the Anthem data breach] to freeze their credit, because they got everything.”

Unlike a stolen credit card number, your Social Security number can’t be changed easily (it’s a rare circumstance that warrants such a change), so you never know when someone might use it to commit fraud.

Drawbacks of Credit Freezes

A credit freeze only prevents credit fraud — tax-related identity theft, criminal identity theft, medical identity theft and other abuses of personal information are still possibilities, because they don’t involve credit reports or credit checks.

On top of those limitations, dealing with a credit freeze can be cumbersome. Unlike placing a fraud alert on your credit file, you have to contact each of the three major credit bureaus to freeze the individual files, and to thaw them requires contacting all three again. (Adding a fraud alert only requires contacting one bureau, and that information is shared across all three.) Depending on where you live, you may have to pay to freeze and thaw your credit, but it’s free if you’re doing it because you’re already a victim of fraud.

“If you’re just very concerned about fraud and you don’t need to have access to your credit history, it might be the right thing to do,” said Rod Griffin, Experian’s director of public education. At the same time, freezes can be very limiting, he said. “For many people, having that credit history is important and they need it often.”

Griffin recommends starting with a fraud alert if you receive notice your information has been compromised in a data breach. If you confirm you’ve been a victim of identity theft, you can request a seven-year extended alert, Griffin suggested, which requires lenders to call you when someone attempts to open credit in your name. The third and strongest step toward protecting your credit from unauthorized use is a credit freeze.

Even if you choose to freeze your credit, you should know it won’t prevent identity theft, because identity theft is not limited to credit fraud.

“Each person has to make an evaluation for themselves,” Levin said. “Is it safer? Yes. Does it give you more protection than a fraud alert? Yes. Does it prevent you from being victimized by several of the more sinister forms of identity theft? Not necessarily.”