Credit freezes are a hot topic these days. With security breaches cropping up at banks, retailers, and even credit reporting agencies (hello, Equifax), many Americans fear that hackers might access their personal data and open new credit lines in their name.
That’s where a credit freeze can help. This tool restricts access to your credit report, and since new credit can’t be issued without a credit check, this effectively thwarts thieves’ attempts to use your identity for nefarious purchases.
While freezing your credit is a good idea if you’re a victim of a data breach or are otherwise worried your credit accounts have been compromised, this poses a problem if you need a mortgage to buy a home, or want to refinance a home loan you already have. The reason: A credit freeze also means that your credit isn’t available for legitimate inquiries, like lenders pulling your credit to assess whether they want to work with you.
But you’re in luck: A new federal law has been passed to make shopping for a home with a credit freeze easier than ever. Here’s how you can protect yourself and move forward with financing (or refinancing).
How to freeze your credit
In September 2018, in the wake of the massive Equifax data breach, the Economic Growth, Regulatory Relief, and Consumer Protection Act was passed, requiring that all three major credit bureaus—Equifax, Experian, and TransUnion—grant consumers the ability to freeze and unfreeze their credit reports for free. That’s a big deal, because before this point, some states charged up to $10 per request to freeze or unfreeze credit—to the tune of $30 total if you were covering your bases with all three bureaus.
This new law also requires each bureau to speed up their response; requests made online or over the phone must be handled within one business day (three days for snail mail).
All you have to do is contact all three of the major credit bureaus (Equifax, Experian, and TransUnion). Create an account, then request the freeze. Make sure to safeguard your PIN and password, as you’ll need them to lift the freeze when shopping for a mortgage later.
How quickly can you unfreeze your credit?
If you need to unfreeze your credit quickly because you need your credit pulled for the mortgage application process, here’s some more good news: This new law also requires that credit bureaus must respond within one hour if you contact them online or by phone to unfreeze your credit. In other words, it’s safe to freeze it, knowing you’ll be able to quickly unfreeze it later if need be.
But it’s up to you to contact the bureau to instigate the thaw. Sometimes clients are unaware that they must unfreeze their credit themselves before seeking mortgage pre-approval. They mistakenly assume that because they have authorized the credit pull, it will work, says Elaine Poff, a licensed loan officer assistant at Fifth Third Mortgage in Cuyahoga Falls, OH.
“Until the unfreezing process has taken place, these potential borrowers cannot get pre-approved for a home. That can slow down the house-hunting process, because your offer isn’t likely to be entertained without a pre-approval,” Poff says. “A delay can lead to unfortunate consequences in the current climate where there are often multiple offers, and time is of the essence.”
That’s why it’s important to unfreeze your credit before starting the paperwork for mortgage pre-approval.
How to unfreeze your credit
The good news is that it’s simple to unfreeze credit. Mike Arman, a former mortgage broker in Oak Hill, FL, recently underwent the process to unfreeze his own credit for a weeklong window during which he refinanced his home loan. Here is how he describes the process:
- Tell your lenders that your credit is frozen, and ask them which bureau they use. (Many use only one, although some use all three, so find out in advance.)
- Call the credit bureaus used, with your PIN and password handy, to access your account.
- Request that your credit be unfrozen, wait an hour, and it should be done! (Or else call to confirm.)
“Yes, it is a bit of a nuisance, but it is a lot less of a nuisance than having your identity stolen, and your bank account drained and credit ruined,” Arman notes.
Typically, you’ll only need to thaw it for a week or two, and as soon as the lender advises that your credit has been pulled, you can call the bureaus back and repeat the process to freeze it again.
Just be aware that often lenders will pull credit twice—once when they initially take your application to determine if they want to proceed at all, and again just before closing to make sure you haven’t incurred any debts that would compromise your financial standing. If that’s the case, just find out from the lender when the process will be repeated, and make sure that your credit is thawed to meet that timeline so that you don’t delay your closing.
While this does add an extra step to the mortgage-seeking process, don’t let it deter you from freezing your credit for your safety, because it is easy enough to thaw it when the time is right.