What is The Meaning of Credit Freeze?

What is credit freezing ? - Credittriangle

As a user of credit, you are probably aware of the fact that it is mandatory for all to have a good Cibil score in order to get timely access to credit. Your score is literally your ticket to a loan or any other line of credit, so as a user, it is likely that you are bothered about its safety, especially in the times that we live in. Late in 2017, Equifax, one of the leading credit bureaus worldwide admitted that it had suffered a data breach as a result of which personal financial information of credit users in the US, UK, and Canada had been exposed which left millions of consumers vulnerable to identity thefts.

Identity thefts, if they are not identified on time can have a damaging impact on your Credit Score that may take years to rectify. The thief may take a fresh credit card or loan without the intention of ever repaying them. They can also take up the credit utilization to a very high limit or open multiple credit lines can result in an avalanche of hard inquiries on your credit report. All of these actions will result in your inability to access credit when you need it.

What then should be done to protect yourself from dire consequences? There is always the prudent practice of keeping a periodic check on your credit report, but what happens in case of a data breach? The damage in such cases is way worse than a low CIBIL score as you then bring upon yourself the peril of financial theft. To ensure that you do not bring upon financial doom on account of such an event, it may be the right time to consider a credit freeze.

What is credit freezing 

Simply put, credit freezing is requesting the credit rating agency not to share your credit information with any organization or person. This means nobody has access to your credit records. In order to freeze your credit records, you need to get in touch with the credit bureaus (In India there are three bureaus dealing with consumer credit CIBIL, Experian and Equifax), provide some basic personal details and request them to freeze your credit records. You can do this through mail or a letter by attaching your personal identification details.

Benefits of credit freezing 

If you are living in fear that your credit information is not safe, freezing your credit is the best thing to do. Unfortunately, many consumers in the past have had to go through the trouble of raising a dispute with credit bureaus after they have found out that their credit identity had been compromised and multiple lines of credit had been issued in their name. This in turn resulted in a low CIBIL score, which took them a fairly long term to rectify, not to mention the mental harassment that they had to undergo. Credit freezing may thus be looked at as a prevention rather than having to resort to a cure after the damage is done.

When in need of credit- Unfreeze

Firstly, credit freezing does not impact your existing lines of credit or CIBIL score. Neither does this mean that you credit records or keep track of. This means you need to go on making repayments on your existing line of credit and do all it takes to maintain a good credit score.

You can keep your credit records frozen temporarily and can unfreeze it with the similar procedure of writing into the credit bureaus. It is prudent to unfreeze your CIBIL records when you are in process of making an application for a fresh line of credit. When you make an application for a new loan or a credit card, the lender must access your credit records as a mandatory credit assessment procedure. The failure to access your records will work against you, and your application may be rejected as a result.

Therefore, if you are planning to freeze your credit records as a preventive measure, go ahead with the same. However, do remember to unfreeze your records at the time of applying for any new credit. You can even check with the concerned lender about the credit bureau they refer to and unlock your records at that particular bureau instead of unlocking all three at once.