With the recent Equifax data breach affecting more than 140 million consumers nationwide, many people are feeling a little on-edge in regards to their financial data. Unfortunately, it seems as though nobody is safe from identity theft and security breaches these days—not even the major credit reporting bureaus themselves. Fortunately, there are options available to help you better monitor and protect your credit and financial data. For example, if you’re preparing to close on a new home, you may want to consider putting a credit freeze in place as soon as you close escrow.
What is a Credit Freeze?
Essentially, a credit freeze is a “lock” that can be placed on your credit report that will prevent creditors from accessing your credit information, thus preventing new accounts from being opened in your name. While existing creditors (such as your mortgage company after closing on a home loan) will still have access to your credit information, new inquiries will not be permitted without your explicit consent.
When you put a credit freeze in place, you will typically need to create a pin or password that will need to be provided any time you wish to remove the freeze from your account. In most states, there is also a nominal fee associated with implementing and lifting a credit freeze. There are some exceptions to this, such as if you’ve been a part of a data breach or are the victim of identity theft—so be sure to explore your options before you pay to freeze your credit.
Benefits of a Credit Freeze
There are many reasons to consider a credit freeze after you close on your home loan. For starters, a freeze can give you greater peace of mind in knowing that no new accounts will be opened in your name without your consent. In this sense, even if your personal financial information was compromised as part of the Equifax breach (or another breach), you will be protected from any fraudulent accounts being opened in your name after the freeze.
Furthermore, putting a freeze on your credit will have no impact on your credit score and it won’t result in any changes to your current accounts.
Is a Credit Freeze Right for You?
If you’re preparing to close on a home, you’ll definitely want to check with your lender to see what they advise. Generally, you’ll want to wait until after you’ve closed and finalized your mortgage before you put a freeze on your credit. Otherwise, you may end up experiencing delays with getting your loan cleared and therefore delays in closing on your new home.
Furthermore, be sure to consider whether or not you’ll need to open any new lines of credit after closing on your home. Some homeowners, for example, will want to open a line of credit with a furniture store to furnish their new homes. If you plan on opening any new lines of credit after closing on your home, you’ll probably want to wait to put the freeze on your account until afterwards.
Finally, remember that you can always place a fraud alert on your credit, which is similar to a freeze but lasts for just 90 days and will require all creditors to verify your identity before opening a new account in your name.
Being proactive is the best way to protect your credit and personal information. If you’re closing on a home in the near future, consider a credit freeze once the transaction is complete.