Worried about identity theft? Here’s how a credit freeze can help

With identity theft and data breaches becoming more frequent, it has never been more important to protect your credit profile. One of the best ways to protect your financial identity from unwanted access is through a credit freeze.

Understanding a credit freeze

A credit freeze is one tool that can take away access to your credit report. Once a credit freeze is in place, it prevents any credit card issuer, lender, or even a fraudster, from accessing your credit report. Also, the credit freeze will stop new accounts from being created in your name. If you choose, a credit freeze can be temporarily lifted or permanently removed, and it does not affect your credit score.

Why consider a credit freeze?

A credit freeze is helpful in all of the following situations:

• You have been a victim of identity theft.
• Your personal documents are missing.
• You are not applying for new credit any time soon.
• You would like to protect your financial health.

“A credit freeze, or security freeze, is a proactive step to protect yourself from identity theft by restricting access to your credit report. It’s a great way to safeguard your financial identity without affecting your credit score. There are four main credit bureaus in India: CIBIL, Experian, Equifax, and CRIF High Mark. To start one, you must contact all four, provide proof of who you are, and get a unique PIN for future use. It is a good way to protect your financial identity that usually doesn't cost anything and won't hurt your credit score or existing loans,” stated Sameer Mathur MD and Founder of Roinet Solution.

How does a credit freeze work?

When you freeze your credit:

1. Your credit file becomes inaccessible to credit reporting agencies
2. Lenders will not be able to process applications submitted in your name
3. However, in very limited circumstances your current creditors and a few government agencies may still access your report.

Steps to initiate a credit freeze

Here's how it works:

1. Contact each of the credit bureaus: You will have to go to the official websites of CRIF High Mark, Experian, Equifax, CIBIL. Each bureau must be handled separately.

2. Provide your identification: You will need to provide documentation such as, PAN or Aadhaar, proof of address, your most recent credit report, which is helpful but not mandatory.

3. Create a password: You may need to create a PIN. You will need that in the future when you will want to remove the frozen.

How to lift or remove a freeze?

A freeze can be:

• Temporarily lifted when you apply for a credit card or loan
• Permanently removed when you no longer need it
• A freeze can be removed by using your PIN either online, over the phone or in writing.

Things to consider

1. A credit freeze does not prevent the use of existing accounts.
2. If you do not remove it ahead of time, there might be a slight delay before loans are approved.
3. Make sure to unfreeze a credit freeze when applying for new credit.

In conclusion, freezing your credit is a smart, proactive way, not just poison control, to protect yourself financially. While it may not feel like much, freezing your credit is a solid defence against identity theft and credit fraud. For those concerned about the state of their credit, it's a safeguard worth consideration.

Disclaimer: Mint has a tie-up with fin-techs for providing credit, you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit score. Mint does not promote or encourage taking credit as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.