PhotoBeginning September 21, 2018, the Federal Trade Commission (FTC) will be putting a new credit file protection layer in place -- one that the consumer controls.

Courtesy of the new Economic Growth, Regulatory Relief, and Consumer Protection Act, consumers can contact any of the three major credit reporting agencies -- Equifax, Experian, and TransUnion -- and request a freeze be placed on their credit files for free, and the agencies have until the next business day to put that freeze in place.

The biggest upside of this act is that it makes it harder for identity thieves to open up new credit accounts under a consumer’s name.

“Credit bureaus play a valuable role in our financial system by helping financial institutions assess a consumer’s ability to meet financial obligations, and also facilitating access to beneficial financial products and services,” wrote Senator Mike Crapo (R-ID), author of the bill.

“Given this role, they have a lot of valuable personal information on consumers and therefore are targets of cyberattacks.”

Freeze or alert -- which is better?

What happens if a consumer wants to remove the freeze on their credit reporting so they can buy or finance something? The good news is the consumer can lift their freeze anytime they want, and the law stipulates that the credit reporting agencies have to make that happen within an hour.

Ever since Equifax suffered a security breach that exposed the credit files of 150 million, consumers have been more than a little concerned about their level of financial protection. While fraud alerts offer some solace, the new freeze option may go a little bit further to secure consumers’ accounts at the cost of some convenience..

In its comparison of the two options, the Privacy Rights Clearinghouse offered this:

A fraud alert places a red flag on your credit reports at the three major credit-reporting agencies (Equifax, Experian and TransUnion) -- alerting potential creditors to take extra precautions before extending credit. Typically, creditors will call you to verify your identity before issuing any new credit.

When you request a fraud alert from one agency:

  • It will notify the other two credit reporting agencies for you (you only need to contact one);

  • It will last for 90 days, though that timeline will be extended to one year starting on September 21, 2018 (can be renewed);

  • It will always free; and

  • It can be extended to seven years if you’re a victim of identity theft

A security freeze (aka credit freeze) will lock your credit files at these agencies until you unlock them. This stops new accounts from being made as new creditors aren’t able to check your credit report -- making it much more effective than a fraud alert in preventing identity theft.

When you request a security freeze:

  • You must notify each of the three credit-reporting agencies separately (one is not enough);

  • It will last indefinitely (until you request that it be lifted); and

  • It may involve fees (depending on your state’s laws) but will be free across the U.S. starting on September 21, 2018

After it weighed out both alternatives, the Clearinghouse gives its preference to the freeze option.

“A security freeze does keep your credit more secure, but can be less convenient to both start and stop (especially if you need access to your credit immediately),” the agency concluded.

The act makes it good for the whole family

A person typically has to be 18 years old to get a credit card of their own, but credit card issuers might be thinking more about lining their own pockets rather than protecting the credit reputation of a child. In fact, a 2017 study by T. Rowe Price found that 18 percent of children ages 8-14 have credit cards in their own name.

This new act offers a bonus for parents concerned about their under-16 children who might be easily lured into getting a credit card of their own. Those children are also eligible to have their credit files frozen.


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