Credit Freeze Vs. Credit Lock: What's The Difference?

Thanks to large data breaches in recent years, both credit freezes and credit locks are gaining in popularity. Both tools stop lenders from accessing your credit information and can be removed and reapplied to make legitimate credit applications. You also have to apply either tool with each of the three credit bureaus (Equifax, Experian, and TransUnion) to receive full protection.

So what's the difference between these two important identity protection tools, and which one is the best for you?

A few significant details stand out.  First, credit bureaus are required by federal law to offer credit freezes. Each freeze and thaw at each credit bureau used to have a fee set by individual state laws, but as of September 21, all credit freezes are free of charge. Should the credit freeze fail, and your account is fraudulently accessed, you won't be held liable for the damages.

Credit freezes may be applied by phone or by mail. Depending on the method you use, it may take up to several days for your credit freeze to go into effect.

Credit locks are credit bureau alternatives to a credit freeze — in part to recover lost revenues and in part to offer extra services that distinguish themselves from competing products. They are contracts between you and the credit bureau that allows you to immediately lock and unlock your credit.

The primary advantage of credit locks is convenience. They can be instantaneously removed or applied using your home computer or apps on your mobile devices.

The disadvantages of credit locks are the contract contingencies, and in some cases, dollar costs. Experian does not offer a free credit lock service, but it does offer auxiliary services based on the package you choose. The lowest cost option is $9.99 per month and includes alerts and theft insurance. Equifax and TransUnion offer free packages, along with more extensive packages for a monthly fee.

If a credit lock fails to work, your liability depends on the contract. Experian and TransUnion include an arbitration clause and a class action waiver in their terms of service. Contracts may contain other obligations — for example, to receive marketing information — and may include clauses allowing terms to change. Review credit lock terms and conditions carefully to select the best package.

Should you use a credit freeze or a credit lock? That depends mostly on your preferred tradeoff between convenience and overall protection. But remember, neither a credit freeze nor a credit lock offers complete fraud protection. They prevent thieves from opening new accounts, but they don't stop abuse of existing accounts.

Protect your existing accounts with common sense steps. Use strong passwords and change them frequently. Beware of phishing e-mails that ask for your account information. Only use secure connections and trusted sites when shopping online. Always check your bank and credit card statements for fraudulent charges, and don't forget to check your credit report. Take advantage of any alerts for suspicious transactions in your accounts or changes in your credit report.

For the best identity protection, use a strategic mixture of tools that protects existing accounts and makes opening fraudulent ones as difficult as possible. Either a credit freeze or a credit lock can handle the latter. Review your options to thoroughly understand the protection you choose.

Credit cards can be an effective way to manage money, improve credit, earn points, and travel with perks if used the right way. Benzinga's personal finance staff provides tips on using credit cards effectively.

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