Credit freezes have been free at major credit bureaus like Equifax, Experian, and TransUnion since 2018. They are intended to stop identity fraud by blocking new credit applications in your name. However, they are not foolproof. Recent data from Javelin Strategy & Research highlights this issue, showing that traditional identity fraud losses reached $27.3 billion last year, affecting 18 million victims. Notably, new-account fraud saw a 31% increase from 2024 to 2025.
The Limits of Credit Freezes
A credit freeze cannot stop all fraud attempts. One significant gap identified by the Federal Reserve is synthetic identity fraud. This involves using a real Social Security number with fabricated personal information, allowing fraudsters to bypass a credit freeze. The freeze does not affect applications made under a new identity, highlighting its limitations.
Understanding Synthetic Identity Fraud
Synthetic identity fraud creates a fictitious person. A scammer uses a stolen SSN, adds a fake name, birth date, and address, and submits it as a new credit application. The credit bureaus, seeing an unfamiliar name paired with a known SSN, open a new file. Initially, the file is thin, but scammers gradually build it with small credit lines and timely payments. Ultimately, they max out the credit limit and disappear.
By the end of 2024, synthetic identity fraud posed a $3.3 billion risk to U.S. lenders. The Federal Reserve’s Risk Officer Report shows that virtual and synthetic identity account openings are on the rise, often detected too late. A credit freeze does not capture this kind of fraud as it is not filed under your name.
Exposures Beyond Credit Freezes
Credit freezes are ineffective against fraud that does not involve a bureau check.
- Account takeovers: Fraudsters change the email on your existing credit card account and start incurring charges.
- Fraudulent tax returns: Use your SSN to claim refunds before you file.
- Medical identity theft: Submit claims to insurance under your name.
- 401(k) takeover: Occurs entirely through call centers without a bureau pull.
The Importance of Multiple Layers of Protection
For a credit freeze to be effective, it must be in place at all three bureaus and remain active. Remember, credit freezes must be placed separately at Equifax, Experian, and TransUnion, and lifting a freeze is quick both online and by phone.
Credit monitoring and identity theft protection services offer ongoing surveillance. They scan credit bureaus and alert you to new activity or compromised personal information not caught by a freeze. These services also scour dark web and data broker listings for exposed personal information, the building blocks of synthetic identity fraud.
Steps to Enhance Your Financial Protection
In addition to a credit freeze, take the following steps:
- Activate alerts for all banking, credit card, and retirement accounts.
- Regularly check credit reports for unfamiliar accounts, inquiries, or information.
- Use strong passwords, a password manager, and enable two-factor authentication.
- Stay vigilant for signs of tax and medical identity theft.
- Reduce personal information available online through data broker listings and dark web scans.
Combining Credit Freeze and Identity Protection
A credit freeze works best when paired with identity protection. While the freeze blocks new credit applications, identity protection monitors other areas. These services alert you to new accounts, inquiries, or file changes and scan for exposed personal information. If fraud occurs, some plans include resolution support and insurance for recovery costs.
No service is foolproof, but using both a freeze and identity protection covers more than either can alone.
Checking for Exposed Personal Information
If you suspect your information is compromised, act now. Perform a free identity breach scan to identify if your data appears in known breaches. Early detection is key to controlling the situation and responding before fraud spreads.
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