How do I freeze my credit file and why should I consider doing it?

Ralph Estep Jr.
00:00:00

Have you ever woken up to discover unauthorized charges on your credit card? Or worse, found out someone opened accounts in your name without your knowledge?

Well, today we're tackling a critical topic that could save you from financial devastation, and that's how to freeze your credit file and why it might be one of the wisest financial moves you'll ever make.

Podcast Announcer
00:00:21

Welcome to the Ask Ralph Podcast where listening to an experienced financial professional with over 30 years of experience can help you make sense of confusing questions, current headlines and industry trends about taxes, small business, financial decision making, investment strategies, and even the art of proper budgeting. Ask Ralph makes the complex simple by sharing his real world knowledge from a Christian perspective with all things financial.

Now here's your Host, Ralph Estep Jr.

Ralph Estep Jr.
00:00:51

Thank you for joining me today. I don't know about where it is where you're at, but it is freezing cold here today. I think we went from summer to winter. And I'm going to be talking about freezes, but not that kind of freezes. Listen, my mission today is to help you master your finances from a Christian perspective. I'm passionate about combining sound financial principles with our Christian faith, all with the goal of guiding you towards financial freedom. Now, if you missed yesterday's show, I talked about 19 steps to overcome your saving shortfall, even if you're already in your early fifties. I strongly encourage you to go back and listen because it was packed with practical strategies that could help transform your retirement outlook.

Today's question comes from Michael in Tennessee, and he writes this:
"Ralph, I'm reaching out because I'm scared and don't know where to turn. Last week, I received a letter from Chase Bank congratulating me on my new $5,000 limit credit card, but I never applied for one. Then yesterday, I got another letter from a mortgage company about a declined $350,000 home loan application. Ralph, I haven't applied for any mortgages. My hands were shaking as I checked my credit report and found five new credit inquiries I never authorized.

As a Christian father of three children, I feel violated and terrified about what this means for my family's future. My wife and I have worked so hard to maintain good credit for the past 15 years, and now it feels like it's all crumbling. I can't sleep at night wondering what other accounts might've been opened in my name. How can I protect myself and my family from this nightmare? What immediate steps should I take to stop this identity theft? And most importantly, how can I prevent this from ever happening again?"

Michael, I feel for you. I can see this is a very emotional issue for you. You used the term "violated" several times, and I get it. When people go through this, the thing I hear time and time again is that they do feel violated. It's so true. And you're also right about that immediate impact. Yes, you see the consequences right away. So I sense the urgency in your note. Your note today perfectly aligns with financial advice and faith, and I've got some great answers for you today. Don't forget to join our live show every Tuesday night at 7:00 PM.

That's right, tonight, you can get it. You go to askralphpodcast.com/live. It's a great place to ask your questions, join our community, and hear from others just like you, Michael, who are facing similar issues and finding ways to balance faith and finances. And here's the best part: every Tuesday night, we give away a $100 Amazon gift card. So again, join us every Tuesday night at 7:00 PM Eastern time. Go to askralphpodcast.com/live, and it'll take you right to the event.

You know, Michael, your situation reminds me of the book of Proverbs, chapter 22:3. And it tells us, "The prudent see danger and take refuge, but the simple keep going and pay the penalty." And Michael, you see the danger. Now you're looking for some refuge, and you're asking me, how do I prevent this from happening? And what can I do to fix it? This verse perfectly applies to that topic today about being proactive with our credit protection.

Well, let’s get to it. Now picture this: Rebecca, a client of mine—again, I don’t use real names—she’s a devoted single mother of two teenagers. She’s getting ready for church one Sunday morning, and all of a sudden, her phone buzzes. She looks down, and this notification made her heart stop. It said, "You’ve been declined for a mortgage application for $425,000."

You might be saying, “Well, that’s unfortunate. That’s a shame. I guess Rebecca was looking to buy a house.” No, that’s not the problem. The problem is she hadn’t even applied for a mortgage. And let me tell you, what followed was nothing short of a financial nightmare for Rebecca. Rebecca told me, she said, “Ralph, within 72 hours, I discovered that six new credit cards had been opened in my name. Somebody had applied for a $35,000 auto loan. And somebody had actually taken out three personal loans, totaling over $50,000.” And she looked at her credit cards.

She did her online credit card statements, and her existing credit cards had been maxed out with purchases she never made. And let me just tell you, the emotional toll on Rebecca was devastating. She told me, she said, “Ralph, I can’t sleep. I don’t feel like eating. I had to take time off my job as an elementary school teacher. I had debt collectors calling me at all hours about accounts I never opened.”

And here’s the worst part: her credit score plunged from 780, which is a great score, down to 540. And all of a sudden, her credit card companies started sending her notices that they were slashing her credit limits and raising her interest rates. It was a stressful time for her. And she said to me, “Ralph, it has even affected my children’s lives too.” She even had to cancel her daughter’s college visit because she couldn’t risk spending any money while sorting out this mess.

But here's where God's wisdom stepped in. Now, Rebecca had been a tax client of mine. I usually saw her at tax time. But she was going through this. She called me, and we set up what I call an emergency meeting. I knew this was a pressing issue for her. So we sat down, and we talked. We focused and meditated on Proverbs 22:3 about the prudent seeing danger and taking refuge. I told Rebecca, "Here's a great thing you can do right away."

She immediately implemented a comprehensive credit freeze across all three credit bureaus. And that's what the show's about today. Think of a credit freeze as building a fortress around your financial identity. That's really what it does, because nothing gets in or out without your explicit permission. As soon as Rebecca did this, the transformation was remarkable. She told me, "Ralph, within days, I stopped getting all these unauthorized attempts because they hit that credit freeze."

If somebody applied for credit, there was a note on her account that it was frozen. She wasn't getting any more surprise credit cards or fraudulent loans. She said, "Ralph, I can finally breathe again."

That credit freeze gave her the protection she desperately needed. She had work to do—disputing the fraud and fixing her accounts. But here's the most powerful part of the story, and to some extent, the tragic part. Rebecca had good credit, like I said—780. She managed her finances well. Had she placed that credit freeze before this identity theft occurred, none of this would have happened. If she had that credit freeze on there, the criminals would have hit a brick wall. They’d have tried to open accounts in her name and been stopped.

That's why I've grown passionate about encouraging you to freeze your credit proactively, not just reactively. If you're listening to me today, here's what I encourage: put a credit freeze on your account proactively—do it today. Think of it like installing a security system in your home.

A lot of people don't think about this. The only inconvenience is that you have to call and turn it off if you're going to apply for credit. But you shouldn't be applying for credit left and right anyway. It’s like waiting to be robbed before taking action. You don’t want to wait—put that security system in your home to prevent robbery. Your financial well-being is just like that. It's a precious gift from God, and we're called to be good stewards of what He’s entrusted to us. So, again, if you listen to nothing else I say today, remember: credit freeze.

Now, it's not going to hurt a thing. A lot of people don't do it, but I think it's a great thing to do. Put that freeze on your account. Let me share some eye-opening statistics that demonstrate why a credit freeze is so critical in today's society. You might be shocked to learn these—I know I was.

The Federal Trade Commission reports that identity theft cases doubled during the pandemic. Even more concerning—listen to this—Rebecca faced this head-on. It takes the average victim 300 hours of work to get things resolved. Think about that: 300 hours of work. That’s two months of full-time effort. I don’t know about you, but I don’t have 300 extra hours.

That’s 300 hours to restore credit and resolve fraud on accounts because they won’t fix themselves. You can’t just send a mass email saying, "Hey, my identity was hacked; open up all your accounts." You have to track down every single one of these. You’ll likely need to fill out fraud affidavits and prove that it wasn’t you. Listen, I know you can't completely prevent every identity theft attack, but we can significantly reduce our risks with credit freezes.

Let me share some more sobering numbers that reinforce why credit protection matters. The average identity theft victim loses $1,100 out of pocket. Eleven hundred bucks! Now, it could be worse, or you might say, "Wait a minute, Ralph, credit card companies take the hit, right?" Yes, if you report it in time, credit card companies will often absorb the loss. But still, on average, identity theft victims lose $1,100 out of pocket. That money could have gone toward tithing, savings, or providing for their family.

Here’s another sobering statistic: 33% of identity theft victims report having trouble paying for necessities like rent, utilities, or groceries while resolving their cases. Think about that. A third of identity theft victims struggle to pay for necessities because their credit cards are maxed out without them knowing, or they’ve had to close their bank accounts.

Without a credit freeze, identity thieves can open new accounts in under 15 minutes. Think about that: without a freeze, they can open new accounts in under 15 minutes. That sounds terrible, but here’s the worst part. On average, it takes six months or longer to get those fake accounts removed.

And here’s another sobering statistic—this one is sad. One in three identity theft victims has had a prior relationship with the fraudster. Think about that for a second. That means the threat often comes from someone you know and trust.

That's just sad, but I think about that. One in three identity theft victims had a prior relationship with the fraudster. Now, maybe that's because you went into a store where the clerk, you know, grabbed your credit card information and stole it, or maybe you applied for a loan, and somebody swiped your information. But here's the good news.

I got good news today. Credit freezes have proven to work. And like I said, when Rebecca implemented her credit freeze, it completely stopped new account fraud. It stopped it dead in its tracks because anytime anybody went to apply for credit, they hit that stop sign and hit that brick wall. And this matches exactly what we know about credit monitoring protection.

If you take those preventative steps, like regular credit report reviews—I can't stress that enough—and maintain good credit habits, these things can significantly reduce our financial risks. Like I said before, just like we're called to be good stewards of our resources, implementing a credit freeze is a practical way to protect what God has entrusted to us. You know, I talk on the show all the time about building an emergency fund. Well, a credit freeze is much like that.

A credit freeze is an emergency fund for your identity. It's there to protect you when those unexpected challenges arise. So you might be saying, "Ralph, I'm sold. How do I make this happen? I want to do this credit freeze right away." So I'm going to walk you through the process. Also, I'm going to put all of these websites and phone numbers in the show notes, because I don't expect you to keep them.

Maybe you're listening to this while you're driving or cleaning—whatever it is. I'm going to put them in the show notes. The process starts by contacting all three credit bureaus. Now, a lot of people will say that if you contact one, they're supposed to communicate with the others. That sounds good, but I would have a relationship with each of these.

I also know that you can download an app. I don't think you have to pay for these. So you contact Equifax. That's at equifax.com/personal/credit-report-services. I say you can call them at (800) 685-1111. They're going to tell you they want you to, uh, create an online account, which is great. Having an online account is good because here's the little secret: then you can turn on and turn off that credit freeze whenever you need it.

So if you're going out to buy a new car, turn that credit freeze off while you're sitting in the finance manager's office. Because here's the secret: if you go to apply and they get hit with the "Hey, your credit report is frozen," that means it's working. The second one to contact is Experian—that's at experian.com/freeze. Now, their number is 888-EXPERIAN—that's E-X-P-E-R-I-A-N.

Again, they're going to ask you to create an online account. Again, that's a good thing since you have access to your file there. And the final one is TransUnion—that's at transunion.com/credit-freeze. Their number is 888-909-8872. And again, they're going to ask you to create that online account.

Like I said, I'm going to put all this information in the show notes so you have it, but create those online accounts because then you can turn on and turn off that credit freeze right away. Remember, this process is free. They're not going to charge you, and you have the right to place or lift the freeze at any time.

So why not do it? And then, when you need to apply for credit, you can temporarily lift that freeze using a PIN number. They'll give you a PIN number during the process. And you might be thinking, "But Ralph, I haven't even been a victim of identity theft. Do I really need this?" Well, I hope you've been listening.

If you've been listening, do you want to be out of pocket $1,100? Do you want to lose 300 hours—two months of your time? Do you want to see your credit score plummet, and then have to work to rebuild it? So let me be clear: in today's digital age, having a permanent freeze on your credit file is like having a security system for your financial house. It's not about living in fear.

That's not at all what I'm saying. It's about being wise stewards of what God has entrusted to us. And I hope you're hearing that. I'm going to share some immediate access steps you can take right away in a few minutes, but first, let me ask you this: I want you to do me a favor today. I'm trying to grow the show.

One of the ways that we can grow the show is if you share it by creating a review and a rating. If you feel like you're getting value from the show—and I sure hope you are—I’d really appreciate it if you leave a rating and a review. The truth is, people often select shows based on our ratings and reviews. They want to see if the show's providing value.

They want to see how many people are actually listening to it. And those ratings and reviews go a long way. So do me a favor: go to askralphpodcast.com/review and leave us an honest rating and review. Another thing you can do is share this with someone you’ve learned something from the show.

You can put that right in the review. Because I want to help. I want you to help me reach more people with our positive message of balancing faith and finance. Again, do me a huge favor: go to askralphpodcast.com/review. Again, that's askralphpodcast.com/review. I would love to hear your feedback. Now, here are those action items I promised. I'm going to give you five steps.

Number one, as I said, contact all three credit bureaus today to implement your credit freeze. Listen, I can't stress this enough. Why not put that freeze on? There is no value in not having that freeze on. You might be saying, "Ralph, well, that's a hassle." Well, I'm going to tell you right now: $1,100 out of pocket, 300 hours in time.

To me, that's a bigger hassle. And when you do that, they're going to give you a PIN number. So store those PIN numbers in a secure location so that you can go turn that credit freeze off. That's number two.

Number three, I have stressed this on so many shows in the past—monitor your credit reports regularly. You can do that through annualcreditreport.com. If you set up online accounts with the credit bureaus, they'll generally give you a copy of your credit report. There's a bunch of free tools they offer. They can give you a report of any changes to your credit. It's a great thing to do. So that's number three: monitor your credit.

Here's something a lot of people don't consider, and that's number four: consider freezing your children's credit files as well. You might do yours, but you're like, "Little Sally, she's only five, Ralph!" Yeah, you know what? Does Sally need to apply for a car loan? Does Sally need to apply for a mortgage? Absolutely not. She doesn't need a credit card. So put a freeze on their accounts as well. I think all you need is their Social Security number and date of birth. So freeze them as well.
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And then here's the thing: number five, create a system to temporarily lift freezes when you need them. If you're applying for a car loan or you're applying for a mortgage, find out when they're going to pull your credit. Go into the credit bureau. You can even ask them, "Which credit reports do you pull?" Maybe they're going to pull all three, what they call a three-way merge or something like that, and then turn them off.

But here's the key: make sure you turn that credit freeze back on. It's simple. They'll give you a PIN number. You log in—credit freeze on, credit freeze off. So that's my five things: contact all three credit bureaus, store those PINs they give you in a secure location, monitor those credit reports regularly. You know, I often say once a year, but I think the more that you monitor it, the better.

One of the things that I have is Norton 360. Anytime something happens on my credit, they send me an alert. Yes, it costs a few bucks, but man, I'd much rather spend that than to spend $1,100 and lose 300 hours of my time that I just don't have. I also talked about freezing your children's credit files and then creating a system that temporarily lifts those freezes. Make sure you put them back on.

Now, tomorrow, I'm going to be discussing five common investment choices that kill your returns. These are investment choices that just don't make sense—they don't help you grow your financial assets. So I'm going to encourage you to make sure you tune in tomorrow for that critical information.

Now, remember this—my passion, and I think you can hear it today. It's cold here in Delaware, and we talked about that credit freeze because my passion is to help you achieve financial success. I want to see you live out your dreams. I don't want to see you spend hour upon hour and lose money dealing with identity theft. So my goal is to help you live out your dreams and grow in your faith.

And I know together we can master your finances from a Christian perspective. So, as I always end the show, I encourage you to stay financially savvy out there. And may God bless you. Go put those credit freezes on right now before you forget.

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00:20:03

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