Advance America: 3 Things to Know About Credit Freezes

A credit freeze is an action consumers can take to prevent lenders and other parties from accessing their credit for as long as needed. Anyone can freeze their credit for free and for any reason with each of the three credit bureaus. They can also lift a credit freeze temporarily or permanently whenever they want to, such as when they need to apply for a loan or credit card.

Although credit freezes seem simple enough, it's important to know all the details about how they work to use them effectively. With that in mind, here are three things to know about credit freezes:

1. They protect borrowers from scammers

The main reason borrowers freeze their credit is to protect themselves against credit fraud if someone has stolen their identity. Once a borrower freezes their credit, most companies are unable to see it. This includes lenders that attempt to check a borrower's credit for lending reasons. So, if a scammer has stolen a borrower's sensitive information — like a Social Security number — they won't be able to create fraudulent accounts in the borrower's name.

2. Borrowers must unfreeze credit to apply for loans and credit cards

Since lenders can't view a borrower's credit score if it's frozen, the borrower will have to unfreeze their credit before they apply for loans and credit cards. So, it's vital to resolve any identity theft problems as soon as possible.

That said, borrowers can unfreeze their credit either temporarily or permanently. For instance, a borrower may unfreeze their credit for a day if they need a quick loan to cover expenses. Their credit will automatically freeze again the next day. On the other hand, they can consider permanently unfreezing their credit if any credit fraud issues have been resolved.

3. They don't affect credit score or preapprovals

Credit freezes don't impact a borrower's credit score, nor do they affect any of the borrower's loan or credit card accounts. Additionally, freezes don't prevent borrowers from getting free copies of their credit reports from each major credit bureau. Beyond that, credit freezes don't impact a borrower's ability to receive preapproval offers for credit cards since lenders only perform soft inquiries before offering these.

The bottom line

Credit freezes can stop identity thieves from opening fraudulent accounts without impacting the borrower's credit score. But keep in mind that they don't prevent identity theft itself. Plus, the borrower has to unfreeze their credit to apply for any new loans or credit cards.

Ultimately, credit freezes are just one tool borrowers can use to build and protect their credit. By getting copies of their report every year and staying on top of their scores, borrowers can catch potential problems early and continue building their credit worry-free.

Notice: Information provided in this article is for information purposes only. Consult your financial advisor about your financial circumstances.


Source: Advance America

About Advance America

Founded in 1997, Advance America, the country's leading state-licensed consumer lender, seeks to help every customer achieve their version of financial stability through a variety of innovative, regulated and transparent small-dollar credit options.

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