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Welcome to the Stay Wealthy Podcast. I'm your host, Taylor Schulte. And as you may recall, last month, I highlighted three financial scams that were growing in popularity and sophistication. In addition to several other tips I shared in that episode, I briefly mentioned toward the end that the uptick in identity theft and data breaches should motivate everyone to freeze their credit if they haven't done so already.
Since that episode aired, I've received dozens of great questions and comments from listeners about freezing their credit. So today I'm answering the top five questions here on the show so everyone can benefit and hopefully, hopefully tackle this important yet often neglected financial planning task.
To grab the links and resources mentioned in today's episode, including my step-by-step guide showing you exactly how to freeze your credit, just head over to youstaywealthy.com forward slash 201. ♪
Everyone should freeze their credit. Yes, everyone. You, your spouse, your kids, everyone. In short, a credit freeze helps you protect your personal information by restricting access to your credit reports. You see, when you freeze your credit, the major credit bureaus, those being Equifax, Experian, and TransUnion, the major credit bureaus, they lock your credit file.
Locking your credit file prevents someone who gets a hold of your identity or your sensitive financial information. It prevents them from opening up new accounts or taking out loans in your name. And believe it or not, it's fairly easy for cyber criminals to get their hands on sensitive information on the dark web. It's also surprisingly cheap to buy. According to CNBC, social security numbers sell on the black market for between two and five dollars.
Driver's licenses sell for between $10 and $20 and banking info for between $15 and $25. The most expensive data, according to this article, is passport information, which sells for over $1,000 per person. So again, if someone really wants access to your personal information, they can likely find a way to get it. And
And if they do, they can cause some serious financial damage. For example, they can open up contracts with phone carriers, clone and swipe your credit cards online, or worse, take out sizable loans in your name, neglect to pay them back, and absolutely destroy your credit history.
And that's why we freeze our credit. Frozen credit prevents someone, including you, from opening up new accounts or loans. So what happens if your credit is frozen and you need to apply for a loan? Well, you simply ask the lender that you're applying for a loan through what credit bureau they plan to obtain your credit report from.
And then from there, you temporarily unfreeze your credit with that bureau, either through their website or mobile phone app or by calling them directly. And while it's a minor inconvenience when applying for a loan, it far outweighs someone stealing your personal data and opening up accounts and borrowing money in your name.
So hopefully by now I've convinced you that you should freeze your credit, which leads nicely to the first question. And that is, well, how do I take action? How do I actually go and freeze my credit to help walk you through the credit freeze process? I've linked to my recently refreshed step-by-step guide in today's show notes, which again can be found by going to you stay wealthy.com forward slash two zero one. But here are the cliff notes for this three-step process.
Step number one is to sign up for free credit monitoring. A free credit monitoring service like Credit Karma or Credit Sesame or one that's provided by your bank or credit card company, they allow you to monitor your credit report and your credit scores as well as keep an eye on any suspicious activity. And
And this is the first step because you may not be able to sign up for credit monitoring once your credit is frozen. And side note here, one listener recently reached out and asked if freezing their credit would disrupt the credit monitoring service that they're currently using. And the answer is no. Signing up for credit monitoring is the proper first step and freezing your credit will not prevent those services from working.
So once you've signed up for free credit monitoring or confirmed that you have access to one through your bank or credit card company, step number two is to contact and request your credit freeze with each of the three major credit bureaus. And while you can do this by phone or by snail mail, processing this online through each of their websites is by far the easiest. It didn't take my wife and I more than 15 to 20 minutes to knock this out.
Once you've contacted and requested your credit freeze with each of the bureaus, step number three is to securely store the credentials that you generated when you froze your credit. For example, if you froze your credit by phone, you will have created a unique pin number. And if you froze your credit online, you will have chosen a username and password.
These credentials will be required to unfreeze your credit in the future, and you certainly don't want them getting into the hands of the wrong person. So personally, I store them in my secure digital password manager, Dashlane. But there are others out there as well, like LastPass and 1Password to consider. Or you can simply add the information to a physical document like a letter of instruction and lock it up in a fireproof safe.
The great thing about freezing your credit is that thanks to the Fair Credit Reporting Act in 2018, the cost to freeze and unfreeze your credit is now free in the United States. There aren't many critical financial planning tasks that are free, easy, and this quick to tackle.
Okay, the next question, which I've received a number of times over the years is, should I freeze my minor child's credit? And if so, how do I do this? So while minors under 18 typically do not have credit reports, cyber criminals can still use their personal information to open up fraudulent accounts.
By freezing their credit, or more accurately, by placing a protected consumer freeze on a minor, you'll limit access to their personal information and mitigate the chances of an unauthorized individual opening up accounts in their name.
Unfortunately, a protected consumer freeze for your minor child must be requested through the mail with each credit bureau and cannot be done online. And while each credit bureau has its own protocol and may require different documentation, in general, you'll need to provide the following proof of your child's identity. This could be a birth certificate or social security card proof of your identity and relation to the child. This could be your driver's license and the child's birth certificate.
And finally, number three, proof of your authority to act on the child's behalf. This would be a court order or legal guardianship documents. Now to unfreeze your child's credit in the future, you'll once again need to contact each credit reporting agency separately. You may need to do this when your minor child becomes an adult or if they need access to their credit report for any reason, like applying for a student loan or their first credit card.
Okay, the third question, which I've received more and more recently, given that so many of our listeners have taken action and frozen their credit is, what other agencies should I freeze my credit with after I freeze with the big three? Those big three being Equifax, TransUnion, and Experian. What else can I do to further protect myself and my family?
So as mentioned earlier, in addition to opening up loans in your name, cyber criminals can also use your personal information to open up cell phone and cable television accounts.
The main entity in charge of monitoring those accounts is the National Consumer Telecommunications and Utilities Exchange, or NCTUE for short. They are essentially a credit reporting agency for telecom companies, which means if you're a telecom customer or you have a utility bill in your name, then this agency has a disclosure report on you.
So if you want to further protect yourself, it's recommended that you place a security freeze on your NCTUE data file in addition to freezing your credit with the major credit bureaus. You can place a security freeze on this data file through their website by phone or by mail, and I'll link to everything in the show notes for quick access. And then lastly, there are other credit reporting agencies that maintain record of your personal information.
And while you can't place a security freeze with all of them, you're still entitled to a free copy of your file each year. The main four are Innovis, Telecheck, EWS, which stands for Early Warning System, and Chex Systems. I'll link to all of them again in today's show notes if you want to learn more, which can again be found by going to youstaywealthy.com forward slash 201.
Okay. The fourth question is, will freezing my credit hurt my credit score? And this is a great question. And in short, no, freezing your credit will not directly affect your credit score. However, freezing your credit, as we've talked about, can introduce some friction when applying for loans or new forms of credit. And
And since the age of your credit card accounts and the diversity of credit types are factors that influence your credit score, well, frozen credit could indirectly influence your credit score over time if you let that little bit of extra friction prevent you from following the basics of maintaining a healthy borrowing profile with the major agencies.
In other words, proving that you have the ability to borrow money and pay it back on time is known to improve your credit score. So if you stop borrowing and you stop building credit because it's a slight inconvenience to unfreeze your credit when there's an opportunity to apply for a loan, then yes, your credit score could be indirectly affected by a credit freeze.
All right, lastly, question number five, what if I've been a victim of identity theft? Is there something else I should do beyond freezing my credit? So if you've been a victim of identity theft, in addition to freezing your credit, you would also want to consider placing a fraud alert on your credit report.
A fraud alert notifies creditors that they need to take additional steps to verify your identity when they receive a request for new credit or changes to existing accounts. And there are two types of fraud alerts that are available. There are initial fraud alerts and there are extended fraud alerts. An initial fraud alert is simple, quick, easy, and free, and it only lasts one year, but it can be easily renewed.
An extended fraud alert is also free, but it requires you to file an FTC identity theft report or an official police report. With one of those reports filed, an extended fraud alert lasts seven years and also removes you from credit card and insurance offers for the next five years.
To place a fraud alert, you only need to contact one of the three credit bureaus, again, Equifax, Experian, or TransUnion, and you only need to contact one of them because they're obligated to inform the others once they receive your request. Okay, I hope today's episode encourages you to take action and complete this simple yet very important planning task.
If you have any additional questions or you have additional information that you think we should share with listeners regarding identity theft, protecting our credit or mitigating cybersecurity threats, please do pass them along. As always, you can email me directly at podcast at youstaywealthy.com. That's podcast at youstaywealthy.com. Once again, you can grab today's show notes, which contain links to everything I referenced today by going to youstaywealthy.com forward slash 201.
Thank you as always for listening, and I'll see you back here next week.
