Freezing Your Credit: Why It's A Good Idea

by Craig Peters, Contributing Writer   

Given rising concerns about identity theft, many people are choosing to freeze their credit. To freeze your credit simply means to restrict all access to your credit report information.

Credit freeze laws vary from state to state, and a few states don't have any credit freeze laws at all. However, all three credit monitoring services have begun offering voluntary credit freezes to everyone — but in order to institute a freeze, you need to contact all three companies.

Why would you want to freeze someone's ability to monitor your credit? Let's take a look at three top reasons:

Stronger fraud protection

A credit freeze means that potential creditors and other third parties won't be able to access your credit report unless you lift the freeze. As a result, it's unlikely that an identity thief would be able to open a new account in your name without you knowing about it.

Ongoing access — when it matters

You'll still be able to access your free annual credit report if you place a freeze on your credit. You'll also be able to purchase your credit score. Companies you currently do business with, such as your credit card and mortgage companies, will still have access to your credit report. In some states, insurance companies, potential employers and landlords and others will still have access to your credit report, too.

Peace of mind

A credit freeze is probably a good idea if you're the type of person who tends to worry a lot about identity theft. You'll have taken a significant step in helping prevent identity theft and will have increased your own management and control of your personal financial information.

Of course, this is just one side of the credit freeze story. Before you make any decisions about instituting a freeze, learn why a credit freeze might be a bad idea.

After all, smart money management begins with taking a close look at all sides of any financial issue.