Do you think a credit freeze can help with your debt consolidation efforts? There are a lot of strategies that will help you pay off your consolidated debts fast. You can cut back on your spending dramatically. Or you can opt to earn more money each month. These options will help increase the amount that you can pay towards your debts. If you can increase your monthly payments, you can get out of debt faster. That would cut short the time that you will pay interest and it will save you money in the long run.
But what about freezing your credit accounts? Do you think it will help you solve your debt problem? Will it help make debt consolidation easier to do? Can it also help you save money on all your debt payments?
What is a credit freeze?
Before deciding if this is a good idea or not, what is a credit freeze?
Admittedly, this was not widely known a few years back. But after major data breaches, it has come to light that freezing your credit may be something that consumers have to know.
What happens after a credit freeze?
Also known as a security freeze, this is when you apply to have your credit report inaccessible. That means nobody, not even you, can open a new credit account. If you really have to get a copy of your credit report, you have to submit a PIN or password.
Since new credit accounts require a credit inquiry, creditors and lenders will have to pull out your credit report. But since you have applied for your report to be frozen, they won’t be able to pull it out. This will stop the new credit application.
This will be a hassle for you but if it turns out that you are not the one applying for the new credit account, then you were just saved from a credit disaster. So if you think that your account had been compromised because of a data breach, then this will protect your account.
In fact, if you are in the midst of a debt relief program, this can also work in your favor. It is a drastic step but if it will help get your debts under control, then it would be worth it.
How do you apply for a credit freeze?
When you apply for this, you need to get in touch with the major credit bureaus one by one. These are Equifax, TransUnion, and Experian. You can go to their official website to initiate the process. Just follow the steps provided to have your credit frozen.
You should also know that there are other credit bureaus that have your credit information. Innovis and the National Consumer Telecom & Utilities Exchange can also be approached by creditors and lenders to access your credit report. If you really want to be thorough with freezing your credit, make sure you get in touch with these bureaus.
Before, you will be required to pay a fee. In 2018, after the major data breach at Equifax, 38% of those who applied for a credit freeze had to pay $30 or more. But that is no longer the case. The government required the credit bureaus to waive the fees involved. So you can have your credit frozen without having to pay anything.
What are the benefits of a credit freeze?
Despite the growing threat of data breaches, consumers do not feel the need to freeze their credit. In fact, only 14% applied to freeze their credit report. It is not clear why consumers do not feel the need to do this. Maybe they feel like they do not need it. Or maybe they just do not understand what it is all about.
If you are trying to decide if a credit freeze is a good idea for you or not, here are the benefits that you can get out of it.
It reminds you to use credit wisely
Are you someone who struggles with debt all the time? If yes, this might be something that you can consider. As mentioned, this is a drastic way for you to control your use of credit. It is true that you have a PIN or password to help you unfreeze your account temporarily. But if you have to go through all of these, you will be reminded of why you had to go through all of that in the first place. So in a way, a credit freeze can keep you in check.
It protects you from identity theft
Identity fraud and theft are serious crimes that are steadily increasing. It can really compromise your financial position. Even if you are in the midst of a debt consolidation program, your efforts will be for nothing. If someone steals your identity and opens a credit account to borrow more money, guess who will pay it off? If you cannot prove that it was not you, then you have to shoulder the payments. You can dispute it but it will drag out. In the meantime, your finances will be ruined. So it can really help if you apply this credit freeze while in the midst of a debt consolidation program.
Of course, getting a credit freeze will not ensure debt freedom. But it will make you realize the gravity of what debt can do to your life. It will help instill the lessons that you have to learn to keep yourself from landing in too much debt in the future.