Here in the Midwest, you can really feel it coming: winter is pretty much on our doorstep.
I admit I have once again been spoiled by summer and need to be reminded that the coming of winter is right on schedule. This really should not be a source of complaint. If I could do something about it, however, I would. Perhaps in one last act of defiance, while I have broken out the sweatshirts, I have yet to put away the shorts.
But I digress.
Winter does have advantages, not the least of which is some additional indoor time to help us focus on matters which perhaps have been put off by the lazy days of summer.
One thing we suggest that our clients and friends take a good look at is credit reporting, and the effect it can have on collections success. This is a very valuable tool and we use it to good purpose to encourage prompt payment of past due bills. Credit reporting can significantly affect the credit score of debtors and can only be relieved by payment of the debts that affect the score. Recent changes to which debts can be reported have led to an increase in credit scores overall, but that does not mean it is any less an important tool.
That said, do you know that you can now freeze your credit for free?
We thought not. This change is the result of a recent law which seems to be flying a bit under the radar.
So, in an effort to also encourage our clients and friends to protect their own credit standing, and take advantage of a consumer tool that can be effective in protecting them from identity theft, we want to make you aware that you can now initiate a credit ‘freeze’ for free through the three credit reporting agencies Experian, Transunion and Equifax.
First off, what is a ‘credit freeze’?
A credit freeze (or security freeze) allows a consumer to restrict access to their credit file which makes it much harder for identity thieves to open credit accounts in your name. This is different than a credit ‘lock’ for which there is often an additional charge.
This law went into effect on September 21, 2018, and is related to the massive Equifax data breach last year. At that time consumers who were identified as having their personally identifiable information stolen from Equifax were given free credit monitoring and the ability to freeze their credit to prevent further financial damage. However, given the scope of the breach, and the widespread impact data theft can have on everyone, the law was enacted to provide at least some protection to consumers in the event someone tries to establish credit, or other type of financing, illegally in their name.
Further detailing the law is a blog authored by Andrew Smith (Federal Trade Commission, Director, Bureau of Consumer Protection) and Gail Hillebrand (Bureau of Consumer Financial Protection, Associate Director, Division of Consumer Education and Engagement) which you can read here.
They point out that enabling a credit freeze is very simple. You only need to contact the three credit reporting agencies using either their web site or by phone (the blog has specific contact information for all three) and they will put the freeze on your account.
How does it work? Here is an example.
Say someone has acquired your personally identifiable information, and attempts to apply for a credit card. Without a credit freeze, it is possible that the thief can apply and receive a credit card based on your good credit rating and proceed to run up debt to their hearts content. Or at least to the credit limit established for the card. And they could do this a number of times. You would never know unless you were regularly monitoring your credit reports, or you went to establish a new source of credit on your own and were denied due to a unexpected decline in your credit score.
By establishing a credit freeze, the bank would look up your credit report, see there is a freeze on it, and ask the thief to take the credit freeze off so they could have access to the report. Failing that, they would not issue a new credit card or other line of credit.
So, what happens if you want to apply for a new card or open a new line of credit for yourself and you have a freeze on your account? The bank sees the freeze, asks you to unlock it for them, you do, and once they have the information they need you can apply the freeze once again.
Doesn’t that take a long time? No, in fact the law requires the credit reporting agency to unfreeze your report within one hour of the request, and likewise put it back on when you ask to put it back on.
Is it easy to do?
Yes, it is. I have personal experience with it and it works quite well. For example, one day I received a letter from my insurance agency regarding their need to access to my credit report to do a new quote for our insurance. This is quite common, but before I put on a freeze they could just access it. Now I have to lift the freeze for them to see it. I called the insurance company’s service number and while the agent was on the phone with me I unfroze my report, they got their information, and then I put the freeze back on, all on-line through their web site. Very easy.
Does this impact the effectiveness of us using credit reporting on your behalf?
No, it does not. We continue to report information to the credit bureaus as always. Credit scores are based on delinquent account reporting and apply to a credit score regardless of a freeze or lock on the consumer’s account.
Protect yourself! Use this free tool to make your financial world just a bit safer.
A. Alliance Collection Agency, Inc. is a full service, licensed accounts receivable management and debt collection agency providing highly effective, customized one on one management and recovery solutions for our business partners. Founded in northern Illinois in 2005, we have been proudly improving the bottom-line on behalf of our business partners in and around Chicagoland for over 13 years.