WSJ Your Money Briefing - A Free Defense Against the Next Big Data Breach: Freeze Your Credit

Episode Date: September 9, 2024

Last month, a lawsuit alleged that a background-check company left as many as three billion records exposed – putting new attention on credit freezes. Wall Street Journal personal finance reporter Imani Moise tells host J.R. Whalen about how this free safeguard could protect you from identity thieves.   Sign up for the WSJ's free Markets A.M. newsletter.  Learn more about your ad choices. Visit megaphone.fm/adchoices

I'm going back to university for zero dollar delivery fee, up to five percent off orders and five percent uber cash back on rides. Not whatever you think university is for. Get Uber One for students. With deals this good, everyone wants to be a student. Join for just $4.99 a month. Savings may vary. Eligibility and member terms apply. Here's your money briefing for Monday, September 9th. I'm J.R. Whelan for The Wall Street Journal. Identity theft can destroy your credit and take months to resolve. And a majority of all identity fraud reports in the second quarter of 2024 were tied to

fraudsters opening new accounts in someone else's name. One way to stay ahead of the bad guys is to freeze your credit. If you already have a line of credit, like a credit card that's already open, you can continue to use that credit card. You can even have your credit limit increased. So your existing creditors can still have access to your file if they want to evaluate your account for a higher limit or potentially reduce that limit. We'll talk to Wall Street Journal personal finance reporter Amani Moise after the break. Powerful backing of American Express. Terms and conditions apply. Visit amex.ca slash business platinum.

A simple free way to protect your credit from identity theft is to freeze your accounts. Wall Street Journal personal finance reporter Imani Moise joins me. Imani, when somebody freezes their credit, what exactly is frozen? So what a credit freeze means is that no one could access your credit report for the purpose of extending you a loan. If you are shopping for a car, for example,

the dealership won't be able to see your credit score, but nothing else is frozen. So you could still have a landlord, for example, check your credit to get approved for an apartment or a potential, check your credit to get approved for an apartment or a potential employer check your credit to offer you a job. But when it comes to a new loan, no one can take that out in your name. Is an account holder's ability to use their credit cards frozen in this process also? If you already have a line of credit, like a credit card that's already open, you can continue to use that credit card.

You could even have your credit limit increased. So your existing creditors can still have access to your file if they want to evaluate your account for a higher limit or potentially reduce that limit. Why is the spotlight on freezing credit now? Because a few weeks ago, there was a major data breach that came to light from this company called National Public Data, which interestingly enough,

a lot of people had never heard of before this breach. But there's a lawsuit that alleges that nearly 3 billion personal records, including social security numbers, mailing addresses, and full names, have been compromised in a potential breach. Considering there's not even 3 billion Americans, you're probably included. Wow. What kind of damage can identity theft or crimes by fraudsters potentially do to your credit profile? It can wreak havoc, especially if you're not paying close attention. So say a fraudster gets your credentials on the dark web and they open up a credit card in your account, you may not get alerted right away.

They can max out that credit card, do that a few more times, and then by the time you check your credit report or you get a notification about your score, it's probably fallen something like 400 points. So on the plus side, all credit cards have protection so that if you can prove that it was not you that made those charges, you're not financially liable for those debts. However, it can mess up your credit and take a really long time to unwind and clear your name with all of the banks and the retailers or whatever companies may be involved.

Why are people hesitant to freeze their credit? One reason people may be hesitant to freeze their credit is that it makes it a little bit harder to apply for loans when you actually want that new credit. Say you are shopping for a car, once again you walk into a dealership, you see your dream car and maybe there's some competition for this car on the lot. If your credit's frozen, you may not walk out of the dealership with a car that day because you have to take the extra step of logging in online, unfreezing your credit. But most people don't need a loan out of nowhere. Usually it's something that you can expect. So say

you're shopping for a house or maybe looking at a loan for school or something like that, then ahead of time you'll want to go ahead and unfreeze your credit so that process can go smoothly. And it's also not really clear where to start. So the first thing that you have to do is you have to do it at all three credit bureaus. You should block out about 30 minutes of your time to make an account and then make sure that you have the ability to freeze and unfreeze your account.

But once you take those steps, freezing and unfreezing only takes a few minutes. It's the equivalent of locking your door before you leave the house. It's also a free process, right? Completely free. The number one thing that people run into when they're trying to freeze their credit

is that there's usually attempts by these credit bureaus to upsell you. They may try to sell you a subscription, extra protection, maybe identity theft insurance. So it could be kind of confusing to navigate that process, but everyone should know that you can freeze and unfreeze your credit completely free. Would somebody's credit score be affected if they do this? Freezing your credit has no impact on your score whatsoever and say you are shopping for that car and the dealer says, hey, your credit's frozen.

They're not gonna assume that you're less credit worthy. They're just gonna remind you that you have to take these few extra steps so that they can go ahead and pull your report. We often hear about companies that will lock your credit. How is this different? A credit freeze is actually protected by law. So there was a federal law that went into effect in 2018

that made it mandatory for the major credit bureaus to allow consumers to freeze and unfreeze their credit for free. A lock is a contract between you and the credit bureau as a customer. Locks will often be sold to people who are looking for how to freeze a credit. They're usually a subscription product, but they'll have add-on services, which can be valuable.

For example, a credit freeze, it's a very passive thing. You won't necessarily know when someone is trying to access your credit report, but if you have a lock, it'll be frozen, but then every single time someone tries to pull your report, you'll get an alert saying, hey, auto lender in X Village has tried to pull your credit, was this you? So you'll get a better sense as to whether or not fraudsters

are actively trying to use your identity. So if somebody's credit is frozen, when will they know when the coast is clear and they can unfreeze their credit? Unfortunately, it's hard to say when the coast will ever be clear, especially when information like social security numbers are so readily available on the dark web, because you can't really change your social security

number. What I came across in my reporting is that a lot of people are actually freezing their credit proactively. So that is before they become a victim of identity theft, and they're considering it the default. So they keep their credit frozen. And in the event that they want to refinance a mortgage or buy a car, then they're making that choice to allow people to pull their file.

Do financial professionals recommend that this be the default for people in managing their credit? Absolutely. So I spoke to plenty of advisors who say even if you don't feel that you've been exposed in a breach or you're not sure that you should go ahead and freeze your credit and leave your credit frozen as a default. Again, there's no downside. It's free. It does not hurt your credit score. And one advisor even said it could potentially be a good thing because it prevents you from opening up new credit on the fly. So in the same way it blocks the scammers, it blocks you.

So maybe you don't need to take out that retail credit card during holiday season because the cashier tells you to. It forces everyone to be more thoughtful when and where they take out credit. That's WSJ reporter Imani Moise. And that's it for your Money Briefing. This episode was produced by Ariana Osborne with supervising producer Melanie Roy and deputy editor Chris Zinsley. I'm JR Whalen for the Wall Street Journal.

Thanks for listening.