Credit freeze

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Credit freezes allow individuals to control how a US consumer reporting agency (also known as credit bureau: Equifax, Experian, TransUnion) is able to sell consumer data. The credit freeze locks the data at the consumer reporting agency until an individual gives permission for the release of the data. Today, credit freezes are made possible by state laws. Laws have been passed by nearly half the US states. The first state to pass a credit freeze law was California, with a bill sponsored by Debra Bowen in 2003.

Credit Freezes are frequently viewed as the most effective way to prevent financial identity theft. Each year in the United States approximately 15% of all cases of identity theft are cases of new account orgination identity theft, according to the Federal Trade Commission [1]. This form of identity theft occurs when a frauster opens credit in another individuals name. In the credit orgination process, access to a credit report is critical for a lender to make a risk assessment. Because a credit freeze effectively stops any acesss to the credit report, it places a block in the process of issuing credit. Individuals who freeze their credit reports must therefore unfreeze their reports before they wish to apply for credit themselves.

Specific rules and fees for freezing credit reports vary by state.

Federal laws being considered by the US House of Representatives and the Senate may soon pre-empt state laws and provide a national standard. These laws are generally supported by consumer advovacy organizations and opposed by financial services companies. Bills include HR 3997.

[edit] References

FTC Identity Theft Victim Complaint Data January 1 to December 31, 2005, Federal Trade Commission, Washington, DC, USA, Pg. 6 Figure 5, "How Victims' Information is Misused."