Is freezing your credit really worth the hassle?

Hey Damian,

I’ve been reading a bit on freezing my credit and I guess I’m on the fence about it. It seems like unnecessary work when I could just use the credit monitoring service I pay for and get the same results. What do you think?

A credit freeze and credit monitoring address two different issues.

A credit freeze will prevent anyone from opening up a new line of credit in your name by forbidding a credit bureau to share the details of your credit report. Freezes are initiated with each of the three credit bureaus (Equifax, Experian, TransUnion) and can be handled online or over the phone. And, as of late 2018, it is now free to place or remove freezes on your credit at each bureau.

While freezing your credit will prevent new lines of credit being opened in your name, they don’t prevent nasty things happening with existing lines of credit. Many companies feel that it is in your best interest to pay them to actively monitor your credit. Is it? If you’ve been a victim of identity theft I’m reasonably confident I know your answer as you may still be dealing with the hassle of getting your financial life back in order. I won’t try to convince you that the money you spent (or want to spend) on credit monitoring might be better spent elsewhere, because depending on why you bought it, it might be doing exactly what you want it to do. Monitoring services can provide some helpful benefits if you ever find yourself needing to use them, no doubt. But, what if you could reduce the chances that you’d ever need them in the first place?

For this scenario we’ll look at what the likely outcomes are for having credit monitoring versus freezing your credit. It’s an extreme scenario, but hang with me.

Your intrepid teenager has asked you repeatedly for a new mountain bike. Not just any mountain bike, either. It’s that shiny one on the top rack at the local bike store. You can just make out the price on the tag and it starts with a two, as in $2,000+. You calmly explain there is a better chance Lance Armstrong’s Tour de France victories will be restored to him than your teen getting that bike. They don’t see the humor, of course, and start wondering how they can get their feet onto those pedals.

Once you arrive home you drop off your child at the mailbox to get the day’s mail, as usual, and head to the garage. Your child arrives in the kitchen with the mail in tow and promptly disappears to their bedroom… as usual.

A few months pass. You come home from work late on a Monday evening and wait patiently for the garage door to finish opening when you see it. It’s the coveted mountain bike standing proudly against the wall in your garage. Confused, you search for your teen in hopes they can explain the situation.

“Yeah, I know it’s there. You’re probably going to be mad, but I’ve got a plan,” they start. “I found a credit card application in the mail a few months ago and thought that I’d sign you up for another one and use it to buy the bike. I know it was a lot of money, but I’m going to get a job to pay you back. I promise!”

And, scene!

Like I said, the scenario is a bit extreme for most of us, but that’s not the point. Please don’t miss the point.

If you have frozen your credit this type of situation doesn’t happen because the issuing credit card company can’t process your application. Even if the card offer was “pre-approved”, the issuing company will still do a hard credit check before issuing the new line of credit. So, no credit check, no card, no new bike, and no military school for your child (after they pay you back for the bike).

If you’ve paid for credit monitoring, you’re thinking, why wouldn’t they catch this? They’re supposed to let me know if anyone applies for credit in my name or if any changes happen. What gives?!

The following is taken directly from a prominent credit monitoring company’s website and provides a sobering answer:

“Of course, no alert system can catch every application.”

That’s right. If you’re relying on the service you pay for to protect you, you may want to give them a helping hand because they know they can’t possibly catch everything. In the example case, your teen got lucky and snuck one through the system.

In this case, a new line of credit in your name was open and used. What if junior had just taken a card from your wallet? Would either of these options helped protect you then? The credit monitoring option would be your best bet. They might have alerted you to the purchase if their service can be set up to send notifications of large purchases. However, most credit card companies have the ability to notify you (and possibly other authorized users) any time a purchase is made. While this could become annoying if you use your card frequently, it could also provide a nice check/accountability tool to keep your own spending reigned in, as well.

The overall goal of this piece isn’t to say that one option, monitoring or freezing, is better than another. Rather, I hope you can see how you can best protect yourself by using a combination of options. Credit monitoring services certainly can provide valuable services, especially if you’re ever the victim of ID/credit theft. If you can’t (or don’t want to) spend money on another subscription service, create a DIY monitoring program that consists of purchase alerts on your cards/accounts and checking your credit reports regularly. However, freezing your credit will absolutely provide a strong layer of protection making any monitoring service, or method you employ yourself, that much stronger.

Convinced? Here's a post that shows you exactly how to freeze your credit with each credit bureau.