By Brian Krebs
Washingtonpost.com Staff Writer
Friday, October 5, 2007
Experian, a major credit reporting bureau, yesterday said it would allow consumers in all 50 states and the District to freeze their credit histories, giving potential identity theft victims another tool against predators.
Experian and the other two major credit bureaus -- TransUnion and Equifax -- maintain the credit histories of U.S. consumers. These histories are accessed by businesses when consumers want to buy a house or a car, rent an apartment or engage in any activity requiring a line of credit. The credit bureaus also sell some consumer credit data to banks, marketers, insurance companies and others.
Experian's credit freeze service, available Nov. 1, will be free for victims of identity theft. For others, it will cost $10 to place, temporarily lift or remove a credit-history freeze at each of the three bureaus.
Experian joins TransUnion in offering customers the freeze option. Equifax is set to join soon.
A preemptive credit history security freeze is one way to limit damage for the millions of consumers each year who receive a notice that their personal or financial data were lost or stolen. The freeze blocks businesses and potential criminals from gaining access to a consumer's credit report and score, and from granting new lines of credit in the consumer's name. In many states, consumers who want to remove the freeze can use a special identification number to unlock access to their credit file.
Credit file freezes have consequences. A freeze can make it difficult to obtain instant credit, as the consumer must first pay to "thaw" the freeze. In addition, some companies routinely run background checks on potential employees, so job hunting could become more complicated.
Under a law that took effect in July, District residents can place, lift or remove a freeze for $10. Maryland's law will require consumers to pay just $5, but it does not go into effect until January. Virginia has no credit freeze law.
At least 39 states and the District have laws that allow or will allow consumers to freeze their credit files, but many do not take effect until 2008 or 2009.
Yesterday's announcement comes just two weeks after TransUnion broke ranks with the industry to provide the freeze service nationwide.
The credit bureaus typically interact with businesses, not consumers, and have made their money by selling consumer data, consumer advocates say. The recent concerns over identity theft have forced the bureaus to become more consumer-oriented.
"Now that a national model for file freezing has emerged, Experian is offering this option to help prevent consumer confusion," said Kerry Williams, group president of Experian's credit services division.
David Rubinger, a spokesperson for Equifax, of Atlanta, said that the company plans to make a similar freeze announcement soon but that it is "still finalizing the operational details."
Consumer advocates say the credit bureaus have traditionally resisted offering credit file freezes because they interfere with business operations.
Jeannine Kenney, a senior policy analyst with Consumers Union, which publishes Consumer Reports magazine, applauded Experian's decision as "a strong first step" but said more action is needed by states and the federal government to guarantee that these new abilities become rights, and that freezes are not bundled with other fee-for-service offerings.
Kenney added that states need to continue to fight for reducing the barriers to filing a freeze, such as the cost. The credit bureaus require consumers who wish to freeze their credit file to do so in writing, via certified mail, unless state laws force the bureaus to provide other options.
"The cost, method and ease of temporarily a freeze can all be artificial barriers if not done correctly," Kenney said.
Experian's Williams said a fraud security alert is a better option for many consumers who are concerned about identity theft. Consumers who have fraud alert on their credit file are called by the credit bureaus if they or someone else tries to open a new line of credit in their name. In theory, the bureau is not authorized to open the account without reaching the customer, but fraud alerts are sometimes ignored.
Consumers nationwide can place a 90-day fraud alert for free by calling one of the big three bureaus. The contacted bureau is required to alert the other two to take similar measures.
The credit bureaus prefer to sell credit-monitoring services, but consumer advocates say these pricey services don't prevent identity thieves from opening lines of credit in other people's names. The bureaus also have profited by selling consumers the right to view their credit histories. But consumer advocates note that under federal law, all consumers can obtain one free copy of their credit report per year from each of the big three bureaus.
Before consumers pay for a credit freeze, they should check to see whether their state offers them the right to place or lift freezes for free or at a lower cost, consumer advocates say.