Is a Credit Report Lock Worth the Hassle?

By Dawn Handschuh, Personal Finance Writer   

Given the time and money involved in locking — or freezing — your credit, you may be wondering if it's worth the hassle to protect your credit and personal information from identity theft.

Consumers in all 50 states can now request credit locks. Simply put, a credit lock or freeze places a red flag on your credit report so that neither lenders, insurers nor employers can access your credit file, which is a prerequisite when someone is trying to open a new account in your name. Credit locks are intended to thwart identity thieves who try to establish fake credit accounts using your name after they've fraudulently obtained your personal information, such as your name, address, date of birth or Social Security number (SSN).

To place a credit lock, consumers need to contact each of the three credit-reporting bureaus in writing, using certified mail and providing various identifying information to prove their identity. There's usually a $10 or $12 fee for doing so, although in many states, victims of identity theft can place a credit lock for free; fees in some states may also be waived for senior citizens.

Credit locks are permanent and remain in place until you lift them — for another $10 or $12 fee — and unlocking your credit may take as long as 10 business days, depending on your state of residence.

The time lag in locking or unlocking your credit, in addition to the associated fees, means that credit locks may not be the best choice for everyone.

It's important to remember that credit locks can't guarantee you'll never experience identity theft. For example, even with a credit lock, a con could still steal your wallet and then go on a spending binge with your credit cards. Although such a theft is upsetting, it's a fairly straightforward process to contact your credit card issuer to close that account and open a new one. Federal law also limits your liabilities in credit card fraud.

Credit locks are most valuable for people who have already been victimized by new account fraud. Instead of simply using a credit card found inside your wallet, a more sophisticated con will use your personal information from your driver's license or other ID cards to create multiple new credit accounts or try to get a loan in your name. This kind of fraud is much more difficult to track down and stop.

If you anticipate applying for a mortgage, car loan, credit card or any other kind of loan in the near future, delay placing your credit lock until after your application has been approved. This will help you avoid the expense and delays of having to lift your credit lock temporarily.

Credit locks won't prevent certain entitles from accessing your credit. These include companies with which you already do business, state or local agencies, law enforcement agencies, trial courts and child support agencies.

In the right circumstances, credit report locks can be a superior identity theft protection strategy, since, unlike credit monitoring, which only spots identity theft after it's occurred, credit locks can help prevent identity theft before it happens. But because credit freezes can delay the timely approval of new loans, credit applications, mortgages, cell phone service, utility service, Internet credit card transactions and in-store credit, they shouldn't be deployed without carefully weighing your circumstances, identity theft risk and future credit needs.

And because credit locks can't prevent the fraudulent use of existing credit cards or bank accounts, even consumers with a credit lock in place should still review their credit reports regularly for signs of suspicious activity. (A credit lock doesn't affect your ability to obtain a free annual credit report from any of the three credit-reporting agencies.)