NerdWallet's Smart Money Podcast - Beating Money Procrastination, and When to Unfreeze Credit

Episode Date: September 26, 2022

Sometimes checking things off your financial to-do list can be a real slog. If you find yourself procrastinating, know that you have plenty of company.  To start off this episode, Sean and Liz talk about how to overcome money procrastination. Then they answer a few recent listener questions about student debt cancellation. And in this episode’s money question segment, they talk about when to unfreeze your credit.  To send the Nerds your money questions, call or text the Nerd hotline at 901-730-6373 or email [e-mail]. Timestamps: This Week in Your Money segment: 0:00 - 10:41  Money Question segment: 10:42 - 29:56 Like what you hear? Please leave us a review and tell a friend.

Liz Weston, Jr.: Freezing your credit can mean the difference between protecting yourself from fraud or being the victim of a scammer's ploy. This episode, we tell you how and when to protect yourself with a credit freeze. We'll also answer some questions about student loan debt cancellation. Sean Piles, Jr.: Welcome to the NerdWallet Smart Money Podcast, a show where you send us your money questions and we answer them with the help of our genius nerds. I'm Sean Piles. And I'm Liz Weston. If you have a question about how to manage your money, call or text us on the Nerd Hotline at 901-730-6373. That's 901-730-NERD. Or email us at podcast at nerdwallet.com. Subscribe to get new episodes in your feed every Monday. And if

you like what you hear, please leave us a review and tell a friend. In this episode, we are answering a listener's question about freezing and unfreezing your credit. But first, an hour this week in your money segment, Liz and I are talking about how to stop procrastinating. Because maybe if we talk about it, we'll stop doing it. Yeah. Or we can just keep talking about it and talking about it. But this is an issue that I think everyone deals with from time to time. And one stat that I found that was really interesting is that four in five Americans, 80%, say they put off financial decisions and 35% of those delaying financial decisions say it's because they feel overwhelmed at the thought of them. And this is according to a June 2022 at NerdWallet survey conducted

online by the Harris Poll. Well, at least we have plenty of company. That's nice to hear. Yeah. But it shows that it can be really hard to overcome procrastination and actually do what you want to do. And what I think is important to start with is thinking about and diagnosing why are you procrastinating? For some people, it can be an emotional barrier. They can feel fear about maybe making the wrong decision or not making the quote unquote best decision. And one piece of advice that I got from some podcast somewhere in the ether was that it's not what decision you make. It's what you do with the decision that you make that's important. So there's never going to be a perfect thing to do. It's how you move on with that and make the life that you want, given the current circumstances.

Yeah, I wrote a column about this a while back that some of us are maximizers and we're trying to maximize every single decision, which can mean a ton of research and a lot of dithering. It's like it's really hard because you can't ever have perfect information. At some point, you just have to take the leap of faith and make the decision. But for us maximizers, it can be kind of hard. Yeah, that's true. Well, kind of on the other end of the spectrum, sometimes when I feel like I'm having a hard time getting myself going, whether it's a new gardening project or a painting that I'm working on, it's because I don't have enough knowledge to actually make that decision.

And so I will kind of go more your direction where I'll begin to do a bunch of research. And then I'm okay at a certain point with saying, all right, I feel like I know enough. Let me just move forward and make a decision. The other thing I saw recently was some research about how many of us view money as being cold. So it's cold. it's unemotional, it's not something that we want to engage with. And that can make us put off those decisions. And that's true, even if you do what we do for a living, which is give people money advice. Sometimes, you know, just not there, just can't do it.

Yeah. And something that I can forget from time to time is that many people find dealing with money to be simply boring and overly time consuming and difficult. So that can be a huge barrier because it's so intimidating and unpleasant to even engage with that you just shut down and go do something else. One thing that can help with that is getting some help. If you have trouble in any of those areas, having somebody to give you the information you need, help hold your hand, help you through the process can be really, really great. Sometimes that advice can be super expensive,

but we do have an article on our site that tells you how to get free or low cost financial advice when you're just up against a wall and you can't figure out how to move forward. And even if you're just doing something like trying to find a new credit card or thinking about how to save up for a down payment on a house, we have tons of information on the

NerdWall website that can help you learn more about this so you can make the best decision in an informed way. Yes, exactly. Let's also talk about how to get yourself out of a procrastination rut on your own, maybe if you don't have someone to help you and hold your hand. One thing that I like to do is think about my why. Why am I maybe having a hard time making this decision? And why do I want to do it to begin with? And it doesn't have to be this really lofty thing. Sometimes for me, it's that I just want to file my taxes on time to avoid a penalty or make sure that I'm actually saving up for that thing that I have in mind six months down the road. Oh, that's such a good idea to picture the outcome and picture how good you're going to feel once it's done.

Absolutely. Because it can be so easy to feel stuck in the present and not think about what the payoff will be down the road. And sometimes these tasks don't take as much time as we think they're going to take. Yeah, that is absolutely true. I think sometimes I get caught up spending a lot more time thinking about what I want to do than actually doing it. One thing that comes to mind is way back when I first set up my savings buckets. I thought it was going to take me hours to go in and make my different savings accounts and allocate my direct deposits. And guess what? It took me no more than 15 minutes. And I'm talking 15 minutes from the time I opened my laptop to closing it. I was able to accomplish that where I'd been thinking about it for two weeks leading up to that moment. And it felt so good just to get it done. I've had the opposite experience where I dive into something and think, okay,

I'm going to be able to knock this out in a few minutes. And it winds up taking hours. And I think that's what people really worry about is that they're going to get bogged down. So sometimes just realizing that not making a decision is going to be more expensive than making a decision. This is something that I try to gently imply to my friends who have credit card debt. I know that a lot of this can be circumstantial and hard to get yourself out of, but I try to say, okay, you have this current debt as it is right now. If you maybe looked into a balance transfer card or you talked with a credit counselor and look into getting on a debt management plan to make your debt more affordable, you will save so much money and time paying off your debt.

Yeah. When you have one of those big jobs, it is going to take more time. Breaking it into smaller pieces can really help. And putting things on your calendar to deal with the situation also can be great. Even if you can't take care of it right now, just having a date on your calendar to deal with the situation also can be great. Even if you can't take care of it right now, just having a date on your calendar that, okay, I'm going to deal with it on this date can really help you move forward when you're having trouble making a decision. Yeah. And I really like combining those two strategies.

So say that you've been wanting to get a robo-advisor account for months and you know it's something you maybe should do, but you just haven't done the research. You're not even maybe fully sure what a robo-advisor is for months, and you know, it's something you maybe should do, but you just haven't done the research. You're not even maybe fully sure what a robo-advisor is. So maybe set a date, maybe it's Sunday afternoon at 1pm, when you get back from the farmer's market, pull out your laptop and spend one day reading articles about it. It'll take you probably 30 minutes to read all those articles, because it's not super complicated. And then mull it over, chew on it for a week, the next Sunday, go in and say, okay, I'm going to finally choose one now that I've done all my research. And then the next week, maybe fund done. But however you do it, making progress on these decisions can really help your finances and help you be more comfortable and less stressed in

your life. I like the idea of thinking about, are you a person who does want to designate one day and just knock all of this out? That works for some people. For me, I think maybe it's my ADHD brain. I can be a little bit more scattered. I have to do maybe five things all at once, back to back to back. So I will come back from the farmer's market and then turn to my computer and do a quick money task. And then I'll end up in the garden 30 minutes later. But I like to kind of hop from one thing to the next and feel like I'm gradually making progress in a number of different areas.

But that's just my normal style. Well, you mentioned ADHD, and it can be really hard for people that have ADHD to deal with boring details. That could be a real problem. So trying to sit down and do everything in one day would be just torture. So work with your brain, do what works for you. I know.

Well, before we move on to this episode's money question, we wanna take on a couple of quick listener questions that we received recently about student debt cancellation. One listener left us a voicemail wondering how interest rates will come into play when it comes to which debts will be canceled. So do we have an answer for that? We do have an answer for that, which is something that I was looking for for quite a while, and I'm glad details came out. And we have an article that we will link in our show notes, nerdwallet.com slash podcast. You can find it there. But in simplest terms, basically, if you have several loans of the same type, the loans with the highest interest rate will be canceled first, which is really good news for

those who have high interest rate debt. This is something my partner was concerned about because he has loans from undergraduate that have no interest. He's paid all the interest off on them. But then he has loans from graduate school that carry interest. And he was worried he was going to be stuck with his most expensive loans. And in fact, the opposite will be true, which is great news. And to recap, the student loan debt cancellation applies to federal student loans only. It's up to $10,000 for most people. If you had a Pell Grant in college, it'll be up to $20,000. And there's an income cap to this as well. So if in the year 2020 or 2021, you made under $125,000, you are eligible for this for those who are single or married filing individually.

And for married households filing jointly, the income cap is $250,000. Yeah. And Sean, you mentioned Garrett's undergraduate versus graduate loans. And another listener texted us asking about whether the federal student loan cancellation applies to undergraduate loans only, or if it applies to graduate loans as well. cancellation, and so are parent plus loans. This was something that I think a lot of people maybe missed in the news. It's not just for undergraduate debt. It applies to federal loans across the board. Oh, that's going to be great news for a lot of parents that took on a little too much debt to get their kids through school. Well, listeners, we know you guys have a lot of questions about federal loan cancellation, and we will be keeping you updated as this develops. If you have any

questions for us, please send them to us on the Nerd Hotline. You can call or text 901-730-6373. That's 901-730-NERD, or email us at podcast at nerdwallet.com. Okay, let's move on to this episode's money question. Let's do it. This episode's money question comes from April, who left us a voicemail. Here it is. Hi, my name is April. This year, unfortunately, I received a W-2 in the mail that was ripped open and missing half of it. So I was definitely concerned about my social security number being compromised and my identity stolen and all that sort of stuff. So I froze my credit at the three major credit bureaus. And I'm wondering in the future,

if I need to use my credit to get a loan or a credit card or something, do I need to unfreeze it for all three? Or would it be sufficient to just go through the process for unfreezing at one bureau? How should I approach the times when I maybe need to open up my credit briefly? All right, thank you. And joining us to answer April's question is nerd wallet writer Amanda Barroso. Welcome back to Smart Money, Amanda. Well, thank you, Liz and Sean. I'm really happy to be here with y'all. It's great to talk with you. So Amanda, let's start off by describing what it means to freeze your credit. Can you give us a quick rundown? Sure. So freezing your credit essentially prevents people from opening new credit accounts in your name using your personal information. For example, if someone gets a hold of some of your personal information, applies for a new credit account, that request

would be blocked because the lender wouldn't be able to access your credit or run your credit to be able to approve the application. So this is a great protection against some types of identity theft, some scams. It's not a total guarantee, but it's a really great first step in protecting yourself. Ideally, you need to freeze your credit with all three bureaus. And the three major credit bureaus are Equifax, Experian, and TransUnion. Talk about that a little more. Why is it important to freeze your credit at all three bureaus versus just one? The bureaus are all separate entities and they don't really communicate with one another. They're competitors. So you want to initiate a freeze with each bureau because, like I said, doing a credit

freeze with one doesn't automatically trigger a freeze with the other two. And the other reason why it's important to freeze your credit at all three is because not every lender uses or reports out to all three bureaus. So if somebody was trying to steal your identity or open up a fraudulent account under your name, but the merchant that they're using uses Experian, for example, to check your credit, but you've only frozen your credit with, let's say, Equifax, they might be able to open an account in your name. So that's why freezing at all three offers you that full protection. Yeah, I've heard freezing your credit at only one bureau

or two versus all three as likened to leaving one door of your house unlocked overnight while locking another one. You're vulnerable and someone can walk in potentially. That's a really, really smart analogy. The point is, is that especially now being able to freeze your credit online, and we'll talk, I'm sure, a little bit later about how we can go about doing that, but it's not going to take your whole day to do it. So you might as well, once you've got all your information, sit down, knock all three out at once, and you'll have that peace of mind. We probably should mention that there are other types of identity theft that might not

be prevented by a credit freeze. One of those is tax refund fraud. That's where someone uses your information to gin up a phony tax return and steal your refund. Our listeners W-2 is torn open, so they might want to take that extra step of getting an IP PIN. That's an identity protection PIN. You get that from the IRS. It's a six-digit number that prevents someone else from filing a tax return in your name. Also, credit freezes won't protect you from the criminal identity theft, which is where somebody gets arrested and gives your information instead of their own, or medical identity theft, where

somebody uses your identity or your health insurance to get treatment. And probably most importantly, credit freezes don't protect you from the most common type of credit fraud, which is account takeover. And that is where somebody uses your credit card, for example, to make fraudulent charges. I think the thing about credit freezing, it's not a total guarantee, right? You can't just totally take your hands off the wheel here and just not be paying attention to the accounts you currently have. I think our listeners really smart here, like paying attention to the fact that this envelope had a tear in it, right? Like not just brushing that

off as, oh, you know, I guess the mail carrier was a little rough with the mail. Like, no, this is a red flag, right? I need to pay a little more attention here. I think that's really important. Well, now let's talk about some of the mechanics behind freezing your credit. Amanda, what information do people need to have at hand if they want to freeze their credit? So before you sit down to freeze your credit at all three bureaus, it's good to have a few things on hand. Basic stuff that you've probably have memorized, which is like your social security number, your date of birth, your current address. But if you're someone like me who has moved around a lot, you might want to jot down your previous addresses too, just in case they ask you for that information. It also wouldn't hurt to have your driver's license handy. Now, you might need some different

documentation depending if you're freezing your credit online or by phone or by mail. So if you're doing it by phone, they might ask you a few more questions. So maybe grab like a utility bill or something with your proof of address. You might also need to mail that in. And in terms of those three, the mechanics of freezing it by going online, doing it by phone or by mail, freezing your credit online is definitely the easiest and fastest method. By phone, you know phone is another way to do it. By mail, it's going to take a little bit longer. So just be mindful that the method that you use

might require different documentation. Yeah, they're going to ask you some identification questions and sometimes those are so obscure, they're hard to answer correctly. So if you start off online, you may still wind up having to do it by mail because they can't figure out who you are, essentially. Right.

It's like preparing to go to the DMV, right? Like I remember when I moved to New Jersey and I was getting my driver's license, I brought like a literal file cabinet full of personal stuff because I got turned away the first time I didn't have all the right stuff. So like take a little bit of time, gather up your documentation. It's going to be a lot easier and a lot less frustrating if you have everything you need right there. The other thing that I think is really important to mention is that freezing your credit doesn't

affect your credit score at all. So you're still going to be able to access your credit reports and credit scores with frozen credit. So if you're worried about that, if you're thinking about doing this but are worried that it's going to negatively impact your credit score, don't worry, it will be totally unaffected. Yeah. And you could actually argue that freezing your credit could potentially help your credit score because there is a lesser chance that someone's going to open an account in your name, not pay off a balance, get a late mark, which could tank your credit score. Absolutely.

Now, I want to talk about credit locking versus credit freezing. They sound similar, but they're very different in some key ways. Can you describe credit locking and how it differs from freezing your credit? Sure. So both a credit lock and a credit freeze, they're both available. And the goal is to protect your credit from harm, right? But there are some key differences that people really should be aware of before deciding which one is right for them. So I think for starters, it's simpler to unlock your credit than thaw it or unfreeze it. So for most of the credit bureaus, they offer a credit lock service. And I'll get into that a little bit more about the service piece of it. But if you log into the credit bureau apps or websites, there's usually just like a big

button that you can click on or press that sort of instantaneously locks or unlocks your credit. I was actually just in the Experian website checking on my credit report the other day, and it was just like this big, huge red button, very hard to miss. Another difference, and I sort of mentioned this, is that a lock is instantaneous. While unfreezing your credit can take a few minutes at best, a little bit longer if you choose to go the mail route. So maybe this is important to you. Like, let's say you're out and about and decide to, I don't know, buy a car, buy a new phone, whatever. You know, right? Like, oh my gosh, you just found the perfect car and have to, I don't know, buy a car, buy a new phone, whatever.

Right, like, oh my gosh, you just found the perfect car and have to buy it. You can log into your phone, press that big red button, boom, your credit is unlocked, right? The lender can run your credit report, that purchase is yours. There's this sort of like instantaneous piece to the credit locking that might be appealing to some people. However, there are some pretty big trade-offs with credit locks, right? Absolutely. So here are the two major downsides. The first is cost. Most good things aren't free, although credit freezes are. But a credit locking service often comes with a monthly fee. So each of the main credit bureaus has their own credit locking service that they're likely going to try to sell you.

And so that's something to pay attention to. Whereas credit freezes are free at all the bureaus. The second downside to credit locks is the legal protection side of it. So credit locks are not covered by federal law like credit freezes are. So pay attention to the service agreements. The bureaus warn that they can't guarantee that the service will be error-free or uninterrupted. And so those are definitely some things to think about. Now, at NerdWallet, we recommend most consumers freeze your credit as a preventative measure. So right now, the risk of

exposure for consumers is really high. And so freezing your credit is the most cost effective way to protect your credit and keep it safe. To me, I kind of view credit locks as something for the credit bureaus to try to make a little bit more money off of you besides selling your personal information. It's pretty much just to be able to press this big red button in your app that doesn't give you as much protection as freezing your credit, even if locking is potentially a little bit more convenient. Well, and people who haven't frozen and thawed their credit might not realize it's a pretty quick process. I've never had to wait more than a few minutes to get my credit unthawed. So you might try the freeze first.

If you really don't like it, then you could try the lock instead. Right. And to your point, Liz, the last time I had to thaw my credit was when I actually was applying for my car loan a couple of years back. And before going to the car dealership, I unfroze at two of the bureaus, blanked on the third for some reason. I got there, they were going to run my credit and they realized, oh, hey, this is frozen. And so I just went into my phone and did it within a matter of minutes. It really didn't take that long for me to thaw my credit in that moment. And then they were able to run all of my information and I got my loan. Right. As long as, as Amanda said, you have your login credentials. That's the key part of this. If you are prone to losing those kinds

of things, it can make a freeze and thaw a little bit difficult. Our listener asked if they needed to unfreeze at all three bureaus if they were going to apply for credit or is unfreezing at just one. Okay. And the answer is that you probably need to unfreeze at all three, since you likely won't know which credit bureau the lender is going to use. Yeah. Well, let's talk about the freeze and thaw a little bit more, because that's what our listener is wondering about. Can you talk about how someone can go in and unfreeze their credit if they need to fairly quickly? Sure. So Sean, the example you just mentioned, right, you use the online portal, you had, obviously,

your login credentials, and then a PIN or password that you created when you initially froze your credit at that particular bureau. And that's the information that you're going to need. That's what they're going to ask you for. By phone, it's sort of the same thing. You'll call the credit bureau's number, be directed to somebody who can help you unfreeze it. And like Liz said, within a matter of minutes, it will be unfrozen so long as you have that

PIN or password that you created. Obviously, if you want to do it by mail, that's going to take a little bit longer. So we definitely recommend going online or doing it by phone. Now, the thing about freezing and unfreezing is that the credit bureaus might have little differences or distinctions in the process. So luckily, NerdWallet has guides that walk you through the process at each bureau. We should probably talk about the process of unfreezing in terms of how long it lasts, because I think people might think thawing means, okay, you're taking the freeze off entirely, but you can thaw your credit for just a short period of time, right, Amanda? Let's go back to Sean's example, where he knows he's going to buy a car, he's going

on this day. When he logs in to unfreeze his credit, he can pick a timeframe to thaw his credit. And then when that timeframe is over, boom, that freeze goes right back into place, which I think is a pretty cool feature for someone like me, for example, who has a toddler running around, who has the best intentions, but might forget to just go back and refreeze. So thinking about it as like setting a timer where your credit is thawed, and then boom, that timer goes off, and that freeze goes back in place. So I think that's definitely a tool for people to utilize here. This is also helpful if you're like looking for a house and you know that a few different lenders are going to be checking your credit, you're trying to find the best rates, that kind of thing. Unfreezing it for a certain period of time when you're going to be looking and then keeping it thaw was when the lender took too long to wrap up the process and we wound up having to extend it. So if you're just applying for a credit card, you'll probably need to thaw your credit for

only a few days. If you're doing it for a home, you might need a longer period, say 30 days or more. You might check in with the lender to see how long they think the process is going to take. But even if the freeze goes back into effect, you can always rethought and make your credit accessible again. Yeah. Amanda, you mentioned you were a toddler a little bit ago, and that makes me think about the idea of freezing your child's credit, which I think is something many people might not expect because kids aren't going to be running around with their own credit cards, hopefully. So can you talk about why it's important to freeze your children's credit? Absolutely. So like you said, I know my daughter isn't running around with her Amex or whatever, right? You know, it might seem odd, but here's why it's really important.

So a credit freeze protects minors from having accounts opened in their name that go unexposed for years. So all it takes is for somebody to get their hands on a social security number or some other piece of identifying information, and they're opening credit cards in your kid's name. Well, all of a sudden, surprise, your kid turns 18. They've got their first job. They're ready to go and start building their

credit. And wow, they have all these fraudulent accounts open under their name and their credit is tanked. Their credit's wrecked before they even have a chance to build it themselves. So if your kid is under the age of 16, parents can request a credit freeze and it's still free to do. But the one downside is you're not going to be able to do this online. You're going to have to gather some documentation and mail it to all three bureaus along with a child freeze request form. And on our website at NerdWild, we have links to those forms for Equifax and Experian and then a form letter that we built that you can download for TransUnion. The other thing that you have to keep in mind is that that PIN or password that you're going to use to freeze your child's credit is going to need to be kept safe for years, more than a decade even, you know, for my two and a half year old.

So you have to really be mindful about storing it in a safe place, like a fireproof safe, or even like a secure password manager if you go the digital route so that you can access it down the line when it's time to fill out student loan forms or car loans or that first credit card application. If you do forget your child's information, though, there is a process where you can get the breeze taken off by mail. It is an extra layer of hassle, but it is so worth it to have the peace

of mind. And I think it's especially important if you have anyone in your child's life that is not especially trustworthy. There are people who steal a child's credit and just feel like, oh, well, I'll manage this credit account better than I have my past ones, you know, the reason why they can't get credit. And they wind up doing the same thing. They can't pay a bill and, you know, the reason why they can't get credit. And they wind up doing the same thing. They can't pay a bill and, you know, the utilities get disconnected or the credit card account goes into collections and it's your kid that pays the price. But there's also synthetic identity theft, which is where they grab random numbers to create phony people. And sometimes they grab the numbers of children who haven't been born yet. The social security number hasn't even been assigned. So this is just a great idea. Actually, let me ask you, Amanda, have you gone through the hassle of doing this yet?

No. No, but in preparation for this podcast, you better believe I'm about to get on it. All right. Great. Well, Amanda, do you have any final advice for folks who are thinking about freezing their credit but might not be sure if it's worth it? I think it's always going to be worth it. I think in this particular moment where our personal information is floating around just because we're doing more stuff online, the more protection and peace of mind that you can give you and your family, the better. Great.

Well, thanks so much for talking with us today. Thanks for having me. Now let's get to our takeaway tips and I'll start us off. First up, freeze to fight fraud. Freezing your credit profiles at all three credit bureaus is one of the best ways to protect yourself from credit identity theft. Next, know how to thaw. You can temporarily unfreeze your credit for a period of time and have it automatically refreeze. Finally, think of the children. If you have kids, freezing their credit profiles can help prevent fraud you might not notice for years.

And that's all we have for this episode. Do you have a money question of your own? Turn to the nerds and call or text us your questions at 901-730-6373. That's 901-730-NERD. You can also email us at podcast at nerdwallet.com. Visit nerdwallet.com slash podcast for more information on this episode. And remember to follow, rate, and review us wherever you're getting this podcast.

This episode was produced by Liz Weston and myself. I edited some of the audio and so did our regular audio editor, Kaylee Monaghan. Courtney Nidell wrote our show notes and shout out to the rock stars on the NerdWallet copy desk for all their help. And here is our brief disclaimer thoughtfully crafted by NerdWallet's legal team. Your questions are answered by knowledgeable and talented finance writers, but we are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances. And with that said, until next time, turn to the nerds.