What is a Credit Freeze?

Due to a recent data protection privacy scare, Quebec has brought forward a bill that will allow people to put a freeze on their credit report. Our Ottawa mortgage broker team have has many clients asking how this works and whether it would damage their credit in the future. We’ll go over what a credit freeze is and how it works.

Credit freezing is an option that is free in America, and while it isn’t offered to Canadian’s just yet, it looks like a service that many provinces in Canada are considering. Canada does offer credit monitoring, however, this doesn’t protect consumers very well because they aren’t contacted immediately if suspicious activity has been detected on their account. 

What is a Credit Freeze?

A credit freeze allows you to lock your credit file should there be suspicious activity. It gives more control to Canadians by not allowing any access to a person’s credit until the freeze is removed. This means fraudulent scammers wouldn’t be able to open a new account or make a credit inquiry, protecting a person from credit fraud.

Is It Worth Doing?

A credit freeze protects your credit from hackers and frauds, however, it also means you are blocked from being able to apply for credit. In order to be able to apply for a loan, you can temporarily lift the freeze, but would need to freeze your credit immediately after getting approved for the credit line you were applying for. 

In America, applying to freeze your credit means having to contact all 3 of the credit reporting agencies that serve the U.S. So it can take some time to lift a freeze as well, which isn’t great if you are applying for a time-sensitive credit deal. 

The Pros of Credit Freezing

  • Gives you extra control of your credit data
  • Protects you from having a hacker try to open new credit accounts in your name

The Cons of a Credit Freeze

There are some downsides to credit freezing:

  • Data that has already been compromised is not protected
  • While it stops any new credit lines being opened, it won’t stop an already hacked credit line from being used
  • When you freeze your credit, you are given a secret PIN to use. The problem here is that a hacker can get hold of that PIN

While a credit freeze won’t damage your credit score, anything that was compromised before the freeze could result in issues on your credit report that will need to be disputed.

A credit freeze is one of the best ways to protect and prevent your credit information from being further compromised. It’s a great option for those who don’t often apply for credit or who don’t use their current accounts often. It makes it easier to when something has gone amiss. While it can seem like a hassle, it does give that added protection you need in a day and age where hackers and fraudsters are finding new ways to commit identity theft.

If you have questions about credit freezing or ways to keep your credit information safe, give our Ottawa mortgage broker team a call today!

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