Suze Orman Money Matters

I realize that most of you are dreading another chilly winter, but if you live in one of the 21 states that allow its residents to freeze, consider yourself very lucky.

I'm talking about the ability to shut down access to your credit reports.

There's no magic bullet that guarantees 100 percent protection from identity thieves, but the ability to slap what's known as a credit freeze on your accounts at the three credit bureaus is the best line of defense available against one of the worst types of identity theft: someone posing as you opening new lines of credit, or getting new loans.

To Freeze or Not to Freeze

When you put a freeze on your credit reports, it shuts out new lenders and creditors from checking into your personal financial history. (The companies you already do business with retain their ability to monitor your accounts.)

A freeze gives you more protection than a fraud alert. An alert is merely a yellow light for creditors and lenders that requires them to verify your information personally with you before granting new credit or loans. A freeze goes a step further by not allowing them to look at your record at all.

Of course, freeze makes it extremely difficult, if not impossible, for you -- or anyone masquerading as you -- to get a new credit card or loan, because lenders aren't apt to grant new accounts if they can't size up your credit worthiness.

Not surprisingly, lenders jump on the fact that it freezes you out as much as it does potential thieves. Lenders want you to believe that it's a disservice to you if you don't have immediate access to new credit or loans.

One of the most common anti-freeze arguments is that someone with a freeze on their accounts can't walk into a car dealership on Sunday and get approved for a loan or lease, because the car financing folks can't run an immediate credit check.

Location Is Everything

This is ridiculous reasoning. Anyone who chooses to freeze their accounts can also unfreeze them when they need to let a lender take a look. This can happen in a matter of minutes once you contact the credit bureau -- although the rules state that it could take up to a few days.

Even if it does take a couple of days, anyone who needs to buy a car on a whim or must have a new credit card approved immediately is financially reckless. There's no reason that rational people can't unfreeze their accounts the week before they plan to start car shopping, mortgage shopping, or credit card shopping.

But what's even more ridiculous is that not every American currently has the right to protect themselves with a credit freeze. Less than half the states currently have laws that explicitly allow residents to lock up their credit reports to outsiders.

Disturbingly, a handful of states have even decided that a freeze should only be available to identity theft victims. That's right -- in five states you can't protect yourself until after you've been robbed.

Here's a breakdown of the states with freeze laws:

* Effective September 2008

Loosening a Law

Unbelievably, the post-theft approach was actually gathering steam in Washington last year. Legislation that was making its way through Congress in 2006 would have superseded all state laws and made it national law that only identity theft victims could take advantage of a credit freeze.

The good news is that given the recent change in congressional leadership, this bill is now unlikely to pass. But the fact that it was ever in play is alarming, and completely out of synch with what consumers want.

About 95 percent of respondents to a recent Bankrate.com poll favor allowing everyone to get a credit freeze; just 3 percent think it should be available to theft victims only.

If you don't see your state in the freeze-friendly list, give your government representatives an earful -- or email full. This is a crucially important pocketbook issue that affects every consumer. There's simply no good reason why every state (or the federal government) shouldn't mandate that all citizens are able to protect their financial identity.

Take the Trouble to Freeze

If you do live in a state where you can freeze your credit reports, I recommend that you do so. It's going to take some patience -- the three credit bureaus, Equifax, Experian, and TransUnion, don't exactly roll out the red carpet to help you put on a freeze.

In fact, it's absurd how hard they're allowed to make it for you. You'll need to contact each bureau separately, and must make a written request.

Here's where to find each credit bureau's credit report freeze rules:

• Equifax (scroll down to "Place a Security Freeze on Your Credit File")
  
• Experian
  
• TransUnion

Farm It Out

If you've been a victim of identity theft and have the police record to prove it, your freeze is free of charge. The rules for non-victims vary by state; some offer free freezes, others levy a charge of $10 or so.

Once your freeze is in place you'll receive a personal identification number (PIN) that allows you to lift (thaw) the freeze with a phone call or by going online; the rules vary among the three credit bureaus.

Again, you may be hit with a small fee to temporarily lift your freeze. If you want to permanently remove your freeze, however, the credit bureaus are all to happy to make that change free of charge.

If all of this is too much hassle for you, but you want the peace of mind that comes with knowing you have a freeze on your reports, you might consider hiring someone to do the administrative work for you. In fact, I used TrustedID to handle all the paperwork for me.