The Ins And Outs of Credit Freezes And Locks

No one ever likes getting letters from the IRS, but this one was particularly frightening. Someone filed a fraudulent tax return in my name looking to swipe a big refund. Needless to say, neither of us was entitled to this money.  This means someone has my name, my address, my occupation (not exactly state secrets) but most importantly – my social security number. They also apparently had some knowledge of my financial holdings – at least enough to fake a return. What tripped them up? Apparently they had no idea how much (read:  little) veterinarians make. If they had done a quick google search on “DVM incomes,” they might have gotten away with it. Turns out, I’m not alone. Tax return fraud is one of the most common forms of identity theft right after credit cards. 

Identity theft is a big problem!

I’ve previously told you about my six steps for deterring identity theft. In todays connected world, it’s a “must read”. According to a recent department of justice report, identity theft cost victims on average $1,343. It also leaves individuals with damaged credit, and negatively impacts mental health. Perhaps most infuriating is that victims spend six months and 200 hours cleaning up a mess that someone else created. If someone out there managed to get my personal information, it’s very likely other DVMs are at risk too; however, there are simple steps we can take to protect ourselves. Today we will talk about credit freezes and locks.

What exactly are freezes and locks?

Credit freezes and locks are two different ways of preventing thieves from opening accounts in your name. Essentially, when a creditor contacts a credit reporting agency and tries to verify information on a locked or frozen account, their request is denied. Without this information, the vast majority of lenders will not open an account.  Although freezes and locks look the same, there are important differences.  Generally speaking, locking a credit report is easier and in most cases more convent for users while freezes provide important legal protections. Let’s look more closely. 

How are they different?

Federal law mandates that the three major credit bureaus allow consumers to freeze access to their credit reports. This service must be provided free of charge. When consumers request to lift the freeze, the credit bureaus must honor the request within one hour. Each of the credit reporting agencies has a slightly different procedure to freeze and “thaw” credit report. I have linked their on-line services here: Equifax, Experian and TransUnion

Credit locks are slightly different. The credit bureaus created these services themselves and there is no federal or state law regulating their offering. As such, they are not all free and they may not afford the same legal protection as a freeze. While Equifax and TransUnion offer credit locks as a free service, Experian charges a monthly fee. The Equifax and TransUnion smartphone apps are super convenient – just open and swipe to lock or unlock your report; however, the fact that Experian charges a monthly fee means that most of us will not lock that credit report. This leaves an important back door open to fraud.

Which should I chose?

Unless you lock all three accounts, its best to use the freeze option. Finally, remember that while freezes and locks are an important tool in preventing fraud, there are other avenues available to identity theft criminals. My IRS issue would not have been prevented by either tool. It’s important to keep vigilant and be proactive in deterring Identity theft.