Security freezes and credit scores

Date: November 29, 2018

In May 2018 President Trump signed into law the Economic Growth, Regulatory Relief, and Consumer Protection Act. The Act, among other things, amends the Fair Credit Reporting Act (FCRA) and provides consumers with a substantial expansion of their rights as it pertains to protecting themselves from identity theft and credit fraud. One of the primary changes to the FCRA is that as of September 2018 consumers have the right to add a security freeze to their credit reports at no cost.

What’s a Security Freeze?

A security freeze, also called a credit freeze, is the process whereby the credit reporting companies (CRCs) will restrict access to your credit reports and will not allow lenders with whom you do not have an existing relationship to pull them. Metaphorically speaking, your credit reports will have been taken out of circulation when they’re frozen.

The consumer has control over when to unfreeze or “thaw” their credit reports and put them back into circulation. This will generally happen prior to a legitimate application for credit or some other benefit that will generally result in a credit inquiry. Once the credit report has been procured by the lender or service provider it can be re-frozen by the consumer, at no cost. The benefit to freezing credit reports is fraudulent credit applications can’t result in new accounts being opened because the lender cannot access any credit reports or credit scores.

But What About My Credit Scores?

One of the most common questions that come out of any meaningful change in credit reporting practices is, “how will this impact my credit scores?” Specific to this recent amendment to the FCRA the question is likely, “what happens to my credit scores if I freeze my credit reports?” The answer to the question is: “not much.”

Credit scoring models do not consider whether or not your credit reports are frozen. And, credit freezes don’t prevent lenders and debt collectors from reporting information to the credit reporting companies. As such, freezing your credit reports does not increase or decrease your credit scores. What it will do to your credit scores, however, is restrict their access.

When addressing the benefits of security freezes most of us describe them as restricting access to credit reports, rather than credit scores. While it’s true that security freezes will not have any impact to your credit scores, they will most certainly prevent them from being shared with a 3rd party. In fact, that’s the intent of the security freeze, which is to prevent an unauthorized lender from accessing any credit-related information that can lead to a newly opened fraudulent account.

Can A Lender Still See My Credit Scores?

Because a security freeze prevents unauthorized access to your credit reports and, because credit scores are entirely dependent on credit report data, your credit scores also will not be shared with a 3rd party while your credit reports are frozen. The exception to the rule is if one of your existing creditors wants to see your credit scores. Existing lenders will still have access to your credit scores, just like they will still have access to your credit reports.

So, if you freeze your credit reports and you want to apply for a new loan you’ll have to thaw your credit reports. That will allow the lender to have full access to your credit reports and credit scores. Once you’ve completed the application process, you can re-freeze your credit reports, which will also restrict access to your credit scores but will not change them by even one-point.

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