Net Gains: Freeze! How to Combat ID Theft

You may want to consider a credit freeze as your best defense.

June 10, 2008 — -- The Federal Trade Commission last year estimated that in 2005, some 8.3 million Americans fell victim to identity theft.

That amounts to nearly 23,000 victims every day of the year. It means in any given year about 3 out of every 100 Americans spend significant time and money cleaning up after thieves who adopt their identities for the purpose of committing financial fraud.

Think it can't happen to you? Think again.

It could be happening to you right now. According to the FTC, almost a quarter of the victims do not learn about the misuse of their personal information until at least six months after it has occurred.

That's why you may want to consider a credit freeze as your best defense.

Known also as a security freeze, a credit freeze allows consumers to block access to their credit reports, making it tough for fraudsters to obtain a credit card or some other type of loan in someone else's name. Without access to an individual's credit history, credit card issuers and other lenders are unlikely to approve the requested credit.

The advocacy group Consumers Union calls the credit or security freeze "the only effective means for consumers to prevent the most costly and difficult to detect type of identity theft – new account fraud."

Implementing and lifting a credit freeze can be cumbersome, given the need to contact each of the three major credit bureaus and requirements that differ according to which state you reside in. But the process has become easier within the past year and appears likely to get even easier in the future.

At one time, your right to block access to your credit history depended on your home state. As concerns about identity theft grew, individual states began passing laws allowing consumers to implement a freeze. By last summer, all but 11 states had adopted some version of a freeze law.

Then in September, TransUnion became the first of the three big credit bureaus to announce it would allow U.S. consumers, regardless of residence, to lock down their credit histories. Equifax and Experian soon followed.

For the 11 states that do not mandate credit freezes, consumers must pay $10 to initiate a freeze and then another $10 to lift it temporarily or remove it altogether. In many of the states with pre-existing credit freeze laws, consumers may be able to implement or lift a freeze for as little as $3.

Indiana residents pay nothing at all to implement or lift a freeze.

In all states, there is no charge for individuals who can prove they have been victimized already by identity theft by filing a copy of a police report with the credit bureaus.

The steps to initiate a security freeze or credit freeze vary by credit bureau. Equifax, for instance, requires consumers to send a letter by certified mail requesting the placement of a freeze.

TransUnion also requires a letter, but it need not be certified. Experian makes it even easier, allowing requests to be submitted online at no extra charge.

Equifax and TransUnion only provide online access to a credit freeze to those who pay a subscription fee of up to $14.95 a month for their credit monitoring services.

In all three cases, once a freeze is implemented, the credit bureaus provide consumers with a PIN to allow them to lift a freeze either temporarily or permanently by telephone.

There is a push on to make credit freezes easier to implement and at a lower cost. Consumers Union and other advocacy groups are urging the FTC to adopt rules to make it easier and more affordable for consumers to implement a freeze through a "one-stop shopping" solution like a single web site.

The $10 charge now assessed by the credit bureaus to initiate or lift a freeze does not sound like much. But consider the cost for a married couple to implement a freeze at each of the three major credit bureaus and then lift it temporarily six months later. That would total $120.

For active families, that cost will rise quickly as they buy homes, send children to college and pursue careers.

Members of Congress also are urging the credit bureaus to lower barriers to credit freezes.

"High costs, cumbersome procedures, and obscured information erect unnecessary barriers to consumers who are eager to freeze their files," U.S. Rep. Carolyn Maloney, D-N.Y., wrote to Equifax CEO Richard F. Smith last year.

Those cumbersome procedures cited by Maloney mean you need to think carefully before implementing a freeze. Consider your borrowing needs in the near future, whether it's applying for a new credit card, buying an automobile or obtaining a mortgage to buy a home.

If any of these are in your immediate future, you may want to hold off on initiating a freeze. Or you might want to go ahead with the freeze, but do not forget to lift it temporarily when it comes time to apply for a needed loan.

This need to lift the freeze when applying to borrow money can be helpful to consumers with debt problems. It makes them think twice before applying for another credit card or seeking an auto loan beyond their means.

For more information about credit freezes and instructions on how to implement one, check out a Web site published by Consumers Union, It includes a state-by-state guide and suggestions on issues to consider before implementing a freeze that might be your best defense against becoming one of 8.3 million victims this year.

This work is the opinion of the columnist and in no way reflects the opinion of ABC News.

David McPherson is founder and principal of Four Ponds Financial Planning ( in Falmouth, Mass. He previously worked as a financial writer and editor for The Providence Journal in Rhode Island. He is a member of the Garrett Planning Network, whose members provide financial advice to clients on an hourly, as-needed basis. Contact McPherson at