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Survey: Most don't know what a credit freeze is

Powerful tool to fight ID theft available nationally, but litttle understood

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Credit freezes, the powerful identity-theft-fighting tool that became available nationally Nov. 1, remain a mystery to most consumers, according to a new survey.  

On behalf of CreditCards.com, payments industry consultancy Auriemma Consulting Group used its Web-based research platform to ask 399 American adult credit card users a multiple-choice question designed to see how much people know about credit freezes, which prevent a lender from issuing new credit to a consumer. The results, experts agreed, show the public remains undereducated about what credit freezes are and what they do.   

credit freezeThe survey question, data
The survey asked the following question:

"Credit freezes" recently became available to all Americans. Which of the following do you think best describes what a credit freeze is?"

The responses were as follows: 

  • 22 percent chose: "Locking down some or all of your credit card debt at the existing interest rate."
  • 2 percent chose: "Creating a geographic zone where you can obtain credit, preventing you from using it outside that zone."
  • 35 percent chose the correct answer: "Preventing lenders from creating new credit in your name."
  • 51 percent chose: "I don't know what a credit freeze is."

They could provide more than one answer (although they were restricted to a single answer if they chose "I don't know") to the question, although the vast majority selected just one definition.

Most admit lack of awareness
More than half of those polled acknowledged their ignorance of credit freezes, while the most commonly selected wrong answer ("Locking down some or all of your credit card debt at the existing interest rate") shows that people thinking about credit are most focused on interest rates, says Megan Bramlette, head of research with Auriemma. The firm uses the Web-based surveys to conduct proprietary research for the credit card and payments industry, periodically checking its survey sample against Census data to make sure it's representative of American credit card users as a group. In this case, it agreed to allow CreditCards.com to publish the results.

Just over one-third of those in the survey managed to pick the correct answer ("Preventing lenders from creating new credit in your name").

Haven't warmed up to credit freezes
The results show "consumers don't know what a credit freeze is," says Bramlette. Rachel Kim, associate analyst with research firm Javelin Strategy & Research in Pleasanton, California, agrees. "It's true that most consumers do not know what identity fraud protection services like fraud alerts and credit freezes actually do," Kim says.  

From the standpoint of the credit bureaus, the survey results may also be tied to the fact that credit freezes remain the class misfit -- both largely unpopular and misunderstood. "This is also indicative of the fact that a large number of people haven't been freezing their credit files," says Rod Griffin, manager of public education at Experian. "File freezes are not understood by consumers in general. Consumers think that file freezes will do things that they won't," Griffin says.

Credit freeze facts
What is a credit freeze?
Placing a "security freeze" on credit files blocks lender access to a consumer's credit file, preventing new lines of credit from being opened in the consumer's name. 

Consumers may temporarily or permanently remove the credit freeze, using a PIN number, when access to credit is needed. Freezing and thawing credit has no impact on a consumer's credit score.
How to get a credit freeze To add a freeze, the credit bureaus require a written request that includes some personal information to verify the mailer’s identity. Consumers looking to freeze their credit files can find specific information at each of the three major credit bureaus’ websites:
  • Experian
  • Equifax
  • TransUnion
  • What a credit freeze costs The cost for freezing credit files is typically free for a victim of identity theft. For all other consumers, the amount varies by state, but generally costs $10 for each add, lift, or removal. Information for each state can be found on the credit bureaus' websites and at "Details of credit freeze laws in 50 states."

    Lack of education cited for results
    Others shown the survey results say some fault lies with the credit bureaus themselves. "The players in the industry have not done a great job of educating people about this benefit," Bramlette says.

    Consumer advocacy group Consumers Union also cited lack of education as a factor in the survey results. "Just over one third of this apparently self-selected survey group knew what the security freeze can do for them. Now that the security freeze is available nationwide, a very recent development, the FTC should provide effective consumer education to make sure consumers know about this important tool to stop new account identity theft," says Gail Hillebrand, senior attorney with Consumers Union.

    The Federal Trade Commission recently issued  a report showing that about 8.3 million Americans had discovered they were identity theft victims in 2005. The average cost for each ID theft was $6,300, the report states.

    Reacting to the growing number of complaints about ID theft, almost three dozen states passed laws mandating credit freezes become available from the three major credit bureaus -- TransUnion, Equifax and Experian. The credit bureaus, also known as credit reporting agencies, made them available nationwide, with the last coming on board in November.
     
    Education, easy access may be the answer
    With consumers seemingly undereducated about credit freezes, it may be up to the credit industry to better publicize credit freeze information going forward. Bramlette explains that the ability to educate consumers about a credit freeze represents "low-hanging fruit" for those in the credit industry, adding that adoption of credit freezes benefits everyone involved. It reduces fraud that impacts businesses, makes individuals more watchful of their credit and enables consumers to protect their credit scores and credit histories.

    Education may not be a quick fix, says Experian's Griffin. "It sounds like a simple question, but I don't think the solution is that simple," Griffin says, noting the difficulty of reaching such a large number of consumers. He adds that people are often best reached at "teachable moments," such as being most open to information on preventing fraud after suffering from identity theft, but may be less interested in such information at other times. Furthermore, Griffin cautions that consumers also should be made aware of the downsides to using a credit freeze. "Any time you talk about education, it has to be complete and balanced education," he says.

    Consumer advocates still see access to credit freezes as key, and say the credit bureaus have been reluctant to push them because they're more interested in keeping credit flowing for their paying customers, lenders. "The consumer reporting agencies should make it much easier on their sites and phone lines for consumers who don't already know about the security freeze to learn about it, and should make it easy to request a freeze, including by phone," said Hillebrand of Consumers Union.   

    They're not always easy to find now. For example, on the Equifax website, credit freeze information was not clearly listed on the "Products" page. On the "Contact Us" page, clicking on the link to "Place a security freeze on my credit file" directs visitors to a page that provides instructions on placing a freeze via certified mail. 

    Lawmakers step in 
    Against this backdrop, some lawmakers are attempting to improve consumer access to credit freezes. Two Democratic New York members of Congress -- Rep. Carolyn B. Maloney and Sen. Charles E. Schumer -- have written letters asking the credit bureaus to make freezing credit files more findable and affordable. 

    Maloney, chair of the House Consumer Credit and Financial Institutions Subcommittee, says credit freezes can stop identity thieves from doing their dirty work. "I have applauded the three major credit bureaus for taking steps to make this important consumer protection tool more widely available," she said in reaction to the survey in an e-mail response to CreditCards.com. "However, a number of barriers -- including lack of information -- still prevent consumers from utilizing file freezes and protecting themselves from identity theft. That's why I've worked on legislation and urged the credit bureaus to take additional steps to make their file freeze services easier, faster, and more affordable." 

    Awareness trumps all
    Still, efforts to make credit freezes more accessible will be of little use if consumers remain unaware of what they are. After all, they are unlikely to try and freeze their credit files if they don't know what a credit freeze is, as well as what a freeze can and can't do for them.

    See related:  "Credit freezes go national, get chilly welcome"

    Published: December 12, 2007


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    Updated: 12-04-2016


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