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DEFINITION of 'Credit Freeze'

A credit freeze, also called “security freeze,” is a freeze on access to a consumer’s credit. A consumer who would like to freeze his credit pays the credit reporting agencies a small fee to have his credit report data locked and inaccessible to 3rd parties. To unlock his credit – if, for example, the consumer needs to apply for a loan or mortgage – he pays the credit bureaus another fee to unfreeze his credit information.

BREAKING DOWN 'Credit Freeze'

Who would use credit freezes? The largest group of people who freeze their credit are victims of identity theft. By freezing their credit, victims can stop thieves from opening new accounts in their name. When the thief attempts to sign up for a new financial service, the company will be unable to access credit history and will deny the thief. Other people who could benefit from credit freezes are people who want to limit their own ability to get credit (to prevent impulse purchases) and guardians of the elderly who want to prevent financial elder abuse.

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