Credit Freeze: What It Blocks and What It Does Not, explained

In summary

This is part 2 of 2 of our guide to Protecting Yourself. It picks up where Identity Theft and Scams: How to Protect Yourself leaves off, and it is written to stand on its own: the key ideas are restated where you need them.

A freeze is a legal instruction, not a lock on the data. Since a 2018 amendment to the Fair Credit Reporting Act, each nationwide bureau must place it free within one business day of an online or phone request (three business days by mail) and lift it within one hour (three business days by mail). While it is on, the bureau may not release your report to someone deciding whether to open new credit. The statute then lists who still gets through, and the list explains its limits: your existing creditors reviewing or collecting your accounts; agencies acting under a court order, a subpoena or child-support law; companies sending prescreened offers; a monitoring service you subscribed to; and anyone using the report for insurance underwriting, employment, tenant or background screening, or to verify identity for purposes other than granting credit.

So a freeze stops the thief who wants a new card or loan, but it does not stop a fraudster who already holds one of your accounts, a landlord checking your history, or a new bank account, which banks screen through a separate agency, ChexSystems, that takes its own freeze. That is why 13.4 pairs freezes with account security.

A thief makes $600 of unauthorized transactions: $200 in the first two business days after you learn your debit card was stolen, and $400 after that, before you call the bank.

A fraud alert is a “check ID” sign on the door: a careful clerk will stop an impostor, a careless one won’t. A freeze is a deadbolt — nobody gets in until you unlock it yourself.

The Justice Department’s 2021 survey gives the inputs: 9% of people 16 and older suffered identity theft in a year; 12% of victims lost money of their own, a mean of $790; and victims who resolved their problems spent a mean of 4 hours doing it. Value the running household’s time at its pay: $75,000 ÷ 2,080 hours = $36.06 an hour. A paid monitoring-and-insurance plan is priced here at an illustrative $20 a month; prices vary.

The break-even. A paid plan earns its keep only if it removes more expected cost than it charges: $240 ÷ $21.51 ≈ 11 times the average household’s whole expected loss. Holding the survey’s rates fixed, the mean out-of-pocket loss would have to be ($240 − $12.98) ÷ (9% × 12%) ≈ $21,020, about 27 times the measured $790, or the plan would have to cost about $21.51 ÷ 12 ≈ $1.79 a month. The averages are low because institutions reimburse most reported losses; the free freeze prevents the costly kind.

Freezes: keep your file frozen at Equifax, Experian and TransUnion at all times, and at ChexSystems if you are not about to open a bank account. When you apply for credit, ask the lender which bureaus it uses (a mortgage lender usually pulls all three) and lift only those, for the shortest window the bureau offers. Payments: if anyone who contacted you, by call, text, email or message, asks you to pay or move money by gift card, crypto, wire, payment app or cash, or to a “safe account,” stop and call the institution on a number you already have. Paid monitoring: buy it only if the price is under about $2 a month or a breach notice offers it free; otherwise the freeze does more.

Assumptions: you can verify an institution’s number independently, and the survey averages in 13.3 describe your risk. Ignore the payment rule only for a payment you started yourself to a person or business you located and verified independently; even then, a credit card gives you rights the other methods do not.

How to avoid it: no bank or agency ever asks you to move money to protect it. Hang up, call the number on your card, and set a daily limit on payment-app transfers. If you have already sent a wire, call your bank at once to request a recall and file at ic3.gov the same day.

Can I get my money back if I was scammed through Zelle or another payment app?