Here’s Why a Credit Freeze Won’t Protect Your Identity Completely

A credit freeze makes it practically impossible for fraudsters to open up new lines of credit with your name, but it’s not a one-size-fits-all solution. Reuters

U.S. consumers are still reeling from news of the massive data breach announced by Equifax in September. Some 143 million Americans were impacted in the hack, which exposed all sorts of personal information such as names, dates of birth, Social Security numbers, addresses, and in some instances, driver’s license numbers.

Data breaches are increasingly a part of modern-day life – so much so that understanding how to react to a data breach is just as important as knowing how to prevent one.

Many people have turned to credit freezes in the wake of the Equifax breach. When you “freeze your credit” you ask the three major credit bureaus –Equifax, Experian and TransUnion – to block anyone from opening new credit in your name. Even you won’t be able to open a credit card or finance a cell phone while your credit is frozen.

But how effective is a credit freeze, really, in preventing identity theft and fraud?

While a credit freeze makes it practically impossible for fraudsters to open up new lines of credit with your name, it’s actually not the one-size-fits-all answer we might like it to be. Here’s what to know.

It won’t stop hackers from using your existing accounts to commit fraud. A credit freeze is only good for preventing future misuse of your personal information. If hackers manage to access your existing bank or credit card accounts, it can be difficult to stop them. With the kinds of info accessed during the Equifax breach, scammers could have enough puzzle pieces to commit financial fraud, medical identity theft, employment identity theft or tax identity theft.

It won’t protect you from future data breaches. Credit bureaus aren’t the only businesses that keep sensitive consumer data on file. Think about all the times you’ve filled out medical forms with your Social Security number, birthdate and address, or all the info you fork over to banks or email services when you open a new account. The Equifax data breach isn’t the largest breach in U.S. history by a long shot – it follows massive breaches at Yahoo, Myspace, LinkedIn and Home Depot.

Other ways to prevent identity theft. Banks, of course, have their own sophisticated fraud-detection strategies, but they aren’t fail-safe measures. For that reason, it’s a good idea to set up additional layers of security on your own.

Set up alerts, so you’re notified when someone makes a charge using your credit or checking accounts over a certain dollar limit.

You should also sign up for multi-factor identification for any service you use that offers it, such as email and bank log-in pages. This will generate a unique code and send it to you via email or text. Unless a hacker has both your email account and cell phone handy, he or she won’t be able to log in to your account. Credit cards typically offer zero fraud liability protection, which means you won’t be on the hook for fraudulent purchases.

Look out for any peculiar marks on your credit report and don’t brush off notifications from medical providers or government agencies as spam. They could be clues that someone has used your name to access medical care or tap into your government benefits.

It’s relatively easy to monitor your credit report these days using free services such as Credit Karma or Credit Sesame. You also can access a free credit report from all three bureaus once per year at annualcreditreport.com. You can pay for identity-theft monitoring services, but pay close attention to the monthly fees they charge.

If you notice any red flags on your credit reports, you should dispute them immediately.

How to freeze your credit. If you want the extra peace of mind, you can, of course, freeze your credit. The key is to contact all three credit bureaus and request a freeze at each. Equifax is waiving fees for consumers who want to freeze their credit. Fees for freezing and thawing your credit report vary by state. The National Conference of State Legislatures has more information on state rules on credit freezes and this list from TransUnion offers a look at state-by-state fees.

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