The Pros and Cons of a Credit Security Freeze
aprpeh | 03/24/2008
Due to policy changes at the national credit repositories (Equifax, Experian, and Trans Union); American consumers are able to place a security freeze on their credit file. Before this policy change, only consumers in the 39 states where credit freeze laws had been passed could freeze their credit. Probably sensing pending Federal legislation, the slow big 3 decided (individually, of course - wink wink) that the self-governing thing to do would be to proactively offer credit security freezes to everyone not currently covered by a state law. So end of story, be safe and ask for a security freeze right?
There is as they say, "another side of the story". A credit security freeze is indeed an effective tool to prevent identity theft when the perpetrator is using the actual PII "personal identifying information" of an innocent consumer for the purpose of opening new credit or charge accounts to buy goods or services. But recent statistics show that credit card fraud is merely 28-30% of all identity theft related claims. Another 19% of the reported fraud is related to telephone and utility accounts while 18% is bank fraud and 13% employment fraud (and that accounts only for KNOWN employment fraud).
However, it is unclear whether or not a credit security freeze will be effective preventing synthetic identity theft where a perpetrator may only use one significant component of a consumer’s identity, make up other pieces or mix and match identity components of multiple consumers. Since the credit repository cannot clearly match the “new” identity to an existing credit file the perpetrator may still be successful opening a new unauthorized account. In the end, an unsuspecting consumer, believing himself safe from credit related fraud due to his credit security freeze may still be tracked down by a third party debt collector who utilized a skip trace data base to find the closest match to the “new” identity.
Another problem some consumers have reported involves trying to request their PIN (personal identification number) to unlock their credit file after having lost the PIN letter sent by the bureau. See: http://blog.zonealarm.com/blog/2006/11/locked_your_cre.html {Locked Your Credit Report Access? Make Sure to Leave Time for Credit Checks}
Other consumers have complained they never received their PINs or having to make repeated requests for a PIN.
Credit freezes prevent a credit report from being accessed only for the purpose of approving a new credit application. A freeze will not stop a creditor with which the consumer already has an existing relationship from pulling follow up credit reports. Nor will a credit security freeze prevent account takeover, a large piece of the credit identity theft picture. But what about the records that appear in commonly used non-credit data sources such as Choicepoint? What if a perpetrator uses a victim's PII with an entity that merely verifies personal information using a non-credit data source?
The fact is that utilities (including cable and satellite television)
rarely request credit reports before turning on service and cellular telephone services do not use credit reports nearly often enough before establishing new service. And what about employment related identity theft? Many smaller employers, if not most, never run a credit report anymore. Most pre-employment background checks are based upon criminal record searches, motor vehicle reports and locater searches. Here again, the credit freeze will not help prevent fraud.
A concerned consumer who has not experienced identity theft should not forget altogether about using a credit security freeze since it could be effective in preventing SOME forms of identity related fraud. A victim of identity theft should probably definitely request a credit security freeze. But, just because a consumer places a credit security freeze on their credit file with each of the national credit repositories doesn't mean they are safe from all identity related fraud. Consumers should still take protective measures to safeguard their PII. Losing sleep over the possibility of identity theft is unnecessary. If it happens, it happens. But if you do lose sleep thinking about identity theft, the credit freeze will only salvage a few winks.
