Free credit freezes are almost here: What you need to know

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Brian ActonContributing WriterBrian Acton is a contributing writer at Policygenius, where he covers insurance and finance. His work has also appeared in The Wall Street Journal, TIME, USA Today, MarketWatch, Inc. Magazine, and HuffPost. 

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In the aftermath of the 2017 Equifax data breach, in which the personal information of an estimated 145.5 million Americans was compromised, consumers were left scrambling to protect themselves against identity theft. Thieves who gain access to personal information can open fraudulent accounts under the guise of others, stealing their identity and damaging their credit in the process.

Identity theft continues to rise, and hit an all time high last year. One weapon in the fight against identity theft is the credit freeze, which blocks anyone from pulling your credit report. This means thieves can't take out a line of credit in your name because lenders can't look at your credit, but it also prevents you from doing so as well, so it can get tricky (more on this in a minute). And, depending on your state of residence, freezing your report and lifting freezes can get expensive.

After all this, the federal government responded to the Equifax data breach by instituting free credit freezes for all, making it more affordable to protect yourself against identity theft. Those changes are coming soon, as the FTC reports the law goes into effect on September 21. Here’s what you need to know before then.

What are credit freezes?

As we said, credit freezes place a hold on your credit reports so creditors, lenders and other third parties are blocked from pulling your credit. Because checking your credit is usually a requirement whenever you apply for a loan or credit card, or are getting a new service like cable or insurance, freezing your reports makes it more difficult for anyone to open fraudulent accounts in your name.

Here's the kicker: The three main credit bureaus — Equifax, Experian and TransUnion — don't talk to each other, so you have to place a freeze with each one individually. With fees for a freeze (and unfreeze) anywhere from $2 to $10, the cost of doing this adds up quick.

When you need someone - such as a potential employer, landlord, lender or credit card company - to review your frozen credit for legitimate reasons, you have two options: Remove the freeze entirely or lift it temporarily, also known as a “thaw.”

It's important to note that while your report is frozen, it can still be pulled by your existing creditors, debt collectors acting on your creditors’ behalf or government agencies in response to a court order, subpoena or search warrant.

What you pay

In most states, credit freezes are already free if you’re a victim of identity theft. Beyond that, it all depends on state and circumstance.

But once September 21 rolls around, the Economic Growth, Regulatory Relief and Consumer Protection Act will go into effect and everyone can freeze, thaw and unfreeze their reports without the fees.

Under the new legislation, the credit bureaus must freeze your reports within one business day when notified by phone or online and within three business days when notified by mail. They must be thawed within one hour of a phone or online request and within three business days when notified by mail. If your reports are frozen and you are planning to apply for credit, you will need to plan accordingly.

While the merits of other aspects of the bill are debatable, this is undeniably a win for the consumer.

The limits of credit freezes

While credit freezes are a good way to help guard against identity theft, they aren’t foolproof. If your identity was already stolen, credit freezes can prevent further fraud but they can’t undo any existing damage. You will still have to go through the process of disputing fraudulent information on your credit report (again, with each bureau).

Also, credit freezes only protect your credit report and credit score. If your bank account information or credit card information has been stolen, credit freezes can’t protect your finances. You will need to contact the financial institution or credit card company.

Still seem like you're doing all the right things but your credit is coming up short? Perhaps you're actually doing one of these seemingly-good behaviors that can mess with your credit (for real).

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