Bank fraud and identity theft are Americans’ top financial fears, according to FICO’s 2017 North American Banking Survey. Forty-four percent of Americans reported becoming victims of identity theft or banking fraud as their number one fear, more than twice the number whose top fear was being the victim of a terrorist attack (18 percent).

Identity fraud reached a new all-time high in 2017, affecting 16.7 million Americans and resulting in financial losses of $16.8 billion, according to the 2018 Identity Fraud Study by Javelin Strategy & Research.

Pausing your credit, often called a credit freeze or security freeze, is one way to protect against identity theft. Initiating a freeze of your credit allows you to pause or restrict access to your credit, which may make it difficult for identity thieves to open new accounts in our name.

“Freezing a credit report prevents someone who has a person’s Social Security number and other personal information from gaining access to a person’s credit report,” says Steve Weisman, senior lecturer, law, taxation and financial planning at Bentley University in Waltham, Massachusetts. They’d be unable to open new lines of credit in your name, which “goes a long way in preventing identity theft.”

In 2017, however, less than 1 percent of Americans paused their credit, according to a 2017 credit report analysis of nearly four million CreditSesame.com members. For some, the cost of initiating a pause was a barrier to action.

“In the past, a credit freeze, or security freeze, cost $3 to $10 per credit bureau,” explains Ashley Dull, editor-in-chief of CardRates.com. “Freezing your credit with all three bureaus could cost up to $30.”

Following the Equifax data breach, one in five Americans opted to pause their credit, to the tune of $1.4 billion in fees, says Fundera.com. Fortunately, a new law is removing cost as an obstacle to protecting your financial and personal information when you pause your credit.

What’s New?

As of September 21, 2018, fees for pausing your credit were officially abolished under the Economic Growth, Regulatory Relief, and Consumer Protection Act.

“The law was passed largely in response to the massive data breach suffered by Equifax in 2017 that affected more than 143 million people,” Weisman says.

The previous fee structure — with fees regulated at the state level — required consumers to pay a fee to initiate a credit freeze and, in some states, a separate fee also applied to remove a freeze from a credit report.

“Unfreezing a credit report would be necessary when you needed to permit someone access to your credit report, such as when you applied for a mortgage,” Weisman says. In the past, you would have needed to pay another fee to refreeze it, but “now that it’s free, cost is not an issue.”

Free Credit Protection Extends to Minors

The new law provides for free credit freezes for adults, and parents can also request them for their children. That’s significant, considering that more than one million children were victims of identity fraud in 2017, according to Javelin.

“Freezing the credit reports of children was only possible before this new law in the 29 states that had specific laws to allow it,” Weisman says.

He encourages parents to take advantage of this free service for their children when they’re young to avoid credit hiccups in the future. “Often, the identity theft is not discovered until years later when the child may be applying for financial aid or a car loan,” Weisman says.

By then, the credit damage may already have been done and it can take months or even years to clean up the mess caused by identity theft.

Credit Fraud Alerts Extended

Placing a fraud alert on your credit file alerts lenders or any other entity that checks your credit that they should verify with you first before opening new accounts. Fraud alerts are essentially a tripwire identity thieves have to bypass to obtain credit in your name.

Previously, fraud alerts lasted for 90 days. Going forward, they now remain in place for one year. If you become a victim of identity theft, you can extend a fraud alert for seven years.

How to Pause Your Credit

With credit freeze fees gone, there’s a huge incentive to pause your credit. But when should you do it, and how does it work?

“The best time (and reason) to do a credit freeze is when you’ve been notified of a data breach by a merchant or bureau,” Dull says, “or that your personal data and/or credit information has been compromised.”

Of course, you can pause your credit for your peace of mind, even if those scenarios don’t apply. The Federal Trade Commission says that to pause your credit, you simply need to contact each of the three major credit bureaus and give them:

  • Your name
  • Social Security number
  • Date of birth
  • Current and former address

You may also need to provide an email address and a personal identification number, depending on the bureau you are working with. You’ll use that same information to unfreeze your credit later.

“A credit freeze can be set up and unfrozen quite simply online and it only takes a few minutes to accomplish,” Weisman says.

Here’s where to go to pause your credit online:

What Pausing Your Credit Won’t Do

“How do I freeze my credit?” is a good question. “What does a credit freeze do?” may be an even better one. As previously mentioned, pausing your credit keeps anyone from using your personal information to open new credit or financial accounts in your name. That’s important, but credit freezes only go so far.

Pausing your credit wouldn’t affect any creditors or billers who already have your personal information. If an identity thief were to steal your credit card number for an existing account, for example, they could still use it to make fraudulent purchases. The same goes if someone had already opened a fraudulent account in your name before you initiated the freeze and you weren’t aware of it.

With a freeze in place, any of your existing creditors would still be able to view your credit report, as would government agencies that may need to access your credit file in response to a subpoena, search warrant or court order. And you’d still be able to get your free credit report each year from Equifax, Experian and TransUnion.

Should You Pause Your Credit?

Now that credit freezes are free, there’s a strong argument to be made for using them to your advantage.

“The provisions in this new law make it convenient to take preventative measures in maintaining a credit freeze on your account for added security,” Dull says, “especially when you won’t be opening any new accounts for the foreseeable future.”

Pausing your credit can be just one element of a comprehensive identity protection plan.

“Identity theft can happen to anybody,” says Lisa Schiller, director of investigations and media relations at the Better Business Bureau in Milwaukee. “While a credit freeze can help combat financial identity theft, the BBB still recommends that consumers continue to regularly monitor all bank, credit card and insurance statements for any fraudulent transactions.”

If you’re a Discover cardmember, consider signing up for free Social Security number alerts and new account alerts as another potential safeguard against identity theft.

Also, you have the option of using the Freeze it® feature specific to your Discover card: You can freeze your account online or with a quick phone call. *You can then unfreeze it just as easily. While your account is frozen, no one can use any of the cards on your account to make new purchases, balance transfers or cash advances. There’s no cost involved, and this freezing and unfreezing can be done as many times as you deem necessary.

Consider Pausing Your Credit for the Holidays

You can freeze your credit all year round, but it may be particularly useful leading up to the holidays. In a 2017 Discover survey, 62 percent of holiday shoppers said they were very or moderately concerned about identity theft.

If you don’t plan to open any new credit cards to pay for holiday purchases, pausing your credit now can help keep your credit file safe throughout the season. As you move into the new year, you can reevaluate whether to keep a credit freeze in place, based on whether your upcoming financial goals involve applying for loans or other lines of credit.

*When you freeze your account, Discover will not authorize new purchases, cash advances or balance transfers. However, some activity will continue,including bills that merchants mark as recurring, as well as returns, credits, dispute adjustments, payments, Discover protection product fees, other account fees,interest, rewards redemptions and certain other exempted transactions

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