New Law Makes Freezing Your Credit Free In All States
ARI SHAPIRO, HOST:
As of today, Americans can freeze their credit files for free. That's the result of a new law President Trump signed earlier this year. Ron Lieber says everyone should take advantage of this. He writes the "Your Money" column for The New York Times and joins us now. Welcome.
RON LIEBER: Thank you for having me.
SHAPIRO: Let's start with the basics. What is a credit freeze?
LIEBER: A credit freeze gives you the opportunity to shut down your credit report, your credit file so that any company that does not already do business with you can't look into your report and check up on you.
SHAPIRO: And why do you think everybody ought to do this?
LIEBER: Well, it's one of the best tools that we have for preventing identity theft and stopping identity thieves in their tracks, and here's why. Any company that is not yet doing business with you that might want to open a credit account - say, a credit card or a new cellphone plan in your name - they're going to check your credit report. And if your report is frozen, they will not open a new account for you. So if some thief is pretending to you, they're going to have to go through this credit reporting system. And if the file is frozen, the thief will not be successful in opening the new account in your name.
SHAPIRO: How complicated is it to freeze your credit files? Is there are a lot of paperwork? Is it pretty straightforward?
LIEBER: It is less complicated than it used to be. I was an early adopter on this, like, more than 10 years ago when you had to go to the post office and fill out registered mail forms. And it was a whole thing.
SHAPIRO: (Laughter) Yeah.
LIEBER: You know, the credit reporting agencies still do not make it as easy and as seamless as some of us in the consumer advocacy business would like, but it's much simpler than it used to be. You can go to their websites, and in general you're able to set this up on your own there.
SHAPIRO: Why do these credit reporting agencies have so much power in our financial lives?
LIEBER: Think about it this way. We all want access to easy credit seamlessly, preferably instantly, the moment at which we walk into the car dealership or, you know, stop to open up a store card or go online to set up a credit card. But for that system to function, there needs to be a lot of information stored in a central place such that people can make or computers can make a decision very quickly about whether we are worthy. The downside of course is that all that information is there centrally, just ready and waiting for thieves and other bad actors to take advantage.
SHAPIRO: If people do freeze their credit files, is that going to make it tougher for them to get a new credit card, buy a car, take out a mortgage on a house?
LIEBER: It does make it slightly more difficult to get instant credit because - here's why. When you freeze your credit, what you're going to get is a special PIN number, a personal identification number that you're going to need to use to unfreeze your credit, to temporarily thaw it when you want to get that car loan or start the credit card account. So it's a little bit of a pain but usually doesn't take more than 10 minutes. I've done it, you know, 10 or 15 times over the years.
SHAPIRO: You know, I mentioned that this is the result of a new law that it's now free for people to do this. And it seems that the trend since President Trump took office has been toward deregulation and unwinding restrictions on financial agencies. So explain what led a Republican-controlled Congress and President Trump to force the credit rating agencies to offer this service for free.
LIEBER: I have one word for you, which is Equifax, that breach that we all remember from a year ago. The lack of security controls there were so outrageous and the company's response was so bumbling that it was basically just - it was uncontroversial the idea that people needed to have at least a little bit more access to and control over their credit files.
SHAPIRO: Ron Lieber is a personal financial columnist at The New York Times, where he writes the "Your Money" column. Thanks for joining us again.
LIEBER: It's been a pleasure. Transcript provided by NPR, Copyright NPR.