A new federal law that went into effect this September, makes it free for Americans to have their credit files frozen and unfrozen by credit reporting bureaus.
The Economic Growth, Regulatory Relief and Consumer Protection Act, signed into law on May 24, adjusted the federal law dealing with consumer credit guidelines. The law went into effect on September 21.
A credit freeze, also known as a security freeze, restricts access to an individual’s credit file. This can make it more difficult for identity thieves to open fraudulent accounts in someone else’s name. Individuals will usually get a PIN to freeze and unfreeze their account when they want to apply for credit.
In most cases, creditors need to see an individual’s credit report before they approve a new account, so a freeze can help prevent identity thieves from opening fraudulent accounts. A credit freeze will not impact credit scores nor will it prevent consumers from getting a free annual credit report.
Key changes to credit rules include:
- Individuals will be able to get a free credit freeze. Historically, there were fees associated with credit freezes that were based on state law.
- Previously, some state laws allowed parents or guardians to freeze a child’s credit file until that child is old enough to use credit. The new law allows parents or guardians of children under the age of 16 to freeze the child’s credit file regardless of which state they live in. This freeze is also free of charge.
- Individuals could receive free fraud alerts that required companies running credit reports to check with the individual before opening a new account -these alerts last for 90 days, but as of September 21, the free fraud alert now lasts for one year. Identity theft victims will be able to get fraud alerts for seven years.
- Credit reporting agencies are now required to offer free electronic credit monitoring to all active duty military within one year.
- With the law in effect, Equifax, Experian and TransUnion, the three major credit reporting agencies, are required to set up websites for individuals to request fraud alerts and credit freezes. The Federal Trade Commission will post links to the web pages at https://www.identitytheft.gov/. You can also visit the websites directly by following the links below:
A credit freeze is different from a fraud alert, which is another tool that can be used to prevent fraudulent accounts from being opened. A fraud alert allows creditors to obtain a copy of an individual’s credit report if the creditor takes steps to verify the individual’s identity.
Keep in mind credit freezes and fraud alerts do not prevent the misuse of existing credit accounts, so it is important to monitor accounts for fraudulent activity.
The Federal Trade Commission provides a bevy of information on credit freezes, fraud alerts and how the new law can help protect consumers. For more information on credit freezes and fraud alerts, visit https://www.consumer.ftc.gov/articles/0497-credit-freeze-faqs. For more information on how the new law impacts consumers, visit https://www.consumer.ftc.gov/blog/2018/06/free-credit-freezes-are-coming-soon-0.