One of the most scariest types of identity theft is new account fraud. It happens when an identity thief steal your personal information, open a series of new credit card accounts, loans or other account under your name. According to a new Federal Trade Commission (FTC) study, 8.3 million U.S. adults become victims of ID theft each year. Consumers Union estimates that this amounts to more than 22,000 victims per day and 15 victims per minute. After you are a victim of ID theft, the out of pocket cost varies widely but 10% percent of all ID theft victims reported costs of $1,200 or more, and 10% of victims of new accounts and other frauds reported out of pocket costs of $3,000. One quarter of all new accounts victims reported expenses of at least $1,000. More than half of consumers (56%) who suffered new account fraud did not discover the fraud until after the first month, and for 24% of consumers, it took more than six months to discover new account fraud.

I wrote a post about credit freeze and mentioned how to use credit freeze to prevent identity theft. Today I’m going to write more details about this. Because credit freeze is very useful to prevent ID theft.  A credit freeze, also known as a security freeze, credit report freeze, a credit report lock down, a credit lock down, or a credit lock, allows an individual to control how a U.S. consumer reporting agency (Equifax, Experian, TransUnion) is able to sell his or her data. The credit freeze locks the data at the consumer reporting agency until an individual gives permission for the release of the data. In this way, a credit freeze allow us to stop thieves from getting credit under our names. When we choose to freeze our credit, a business will not be able to open new accounts for a thief until you permit to do so. Placing a credit freeze does not affect your credit score – nor does it keep you from getting your free annual credit report, or from buying your credit report or score.

When you place a security freeze on your file, you will be provided a personal identification number or password to use if you choose to remove the security freeze from your file or authorize the temporary release of your credit report for a specific person or period after the security freeze is in place. The cost of placing, temporarily lifting, and removing a credit freeze also varies.  Identity theft victims might get free credit freeze in many states while other consumers might have to pay $10 for this service. As the credit freeze laws varies according to states, you can find more helpful information from here. Once you decide to temporarily lift your freeze, you have to contact Equifax, TransUnion or Experian and provide the following information:

1. Sufficient identification to verify your identity.
2. Your personal identification number or password provided by the credit reporting company.
3. A statement that you choose to remove the security freeze from your file or that you authorize the reporting agency to temporarily release your consumer report.

It’s very obvious that a credit freeze is very helpful to keep an identity thief from opening most new accounts in your name. However, it’s not an all-purpose solution to all kind of identity theft. It will not protect you from an identity thief from using your current credit cards or other accounts. It is also helpless when a identity thief wants to use services that don’t do a ID check in your name. If there’s identity theft already going on when you place the credit freeze, the freeze won’t be able to stop it. You should also consider the cost and hassle that credit freeze might bring in before you place a credit freeze on your credit report.