What’s A Credit Freeze and How Does it Affect Your Mortgage Options?

There’s nothing worse than finding out you have been the victim of identity theft. It results in you having to put holds on your bank and credit cards, as well as having to resort to a credit freeze to keep the identity thieves from being able to use your data. There are some things that you should know about using a credit freeze and our Katy mortgage lender team is here to help.

What is a Credit Freeze?

Also referred to as a security freeze, a credit freeze will keep anyone from being able to access your credit file until you request the freeze to be removed. This means that no one can open up a new line of credit in your name because, when a lender tries to do a credit check, they will be alerted that the information has been frozen. You can have a freeze placed or removed through a credit referencing agency. You will still be able to use your already existing credit accounts.

However, a credit freeze doesn’t protect you if someone else has made changes on those accounts before the freeze took place. A credit freeze, once placed, stays on your credit report until you have it lifted. This is done by contacting TransUnion, Equifax, and Experian individually. It’s free to put and lift a credit freeze.

Credit Freezes and Mortgages 

While a credit freeze won’t impact your ability to qualify for a mortgage loan, you will be required to take added steps during the mortgage application process. Your first step will be to have the freeze lifted at the start of the mortgage application process to allow lenders to access your data. You will also need to have the freeze lifted once more when it gets to the underwriting process because lenders will want to check your credit file at closing to be sure you still meet the terms and conditions set out at the start of the mortgage application process. 

It’s important that you work with your lender to get a timeline of when your credit file will need to be accessed. It will give you enough time to contact all of the credit bureaus to lift the freeze. Otherwise, you run the risk of missing important deadlines and having issues with timing. It could mean losing out on getting the home you want.

The process of lifting a credit freeze means contacting each bureau. You will need to answer some questions in order to verify your identity, provide them with a copy of a photo ID, your Social Security number, and proof of residence. Some bureaus will give you a pin number that you can use for unfreezing and freezing your report.

What You Need to Consider 

There are a few things that you need to keep in mind when using a credit freeze. For a start, the freeze will work from the time you have requested it until the time you request it to be lifted. A credit freeze won’t rectify any existing credit issues though. Our advice is to get your credit report from all 3 credit bureau agencies and carefully go over them before applying for a mortgage. It will give you time to make any needed corrections. 

There is an alternative to using a credit freeze and that is a fraud alert. A fraud alert allows creditors to access your credit report but only after your identity has been verified. It makes it difficult for identity thieves to try and open new credit accounts in your name, however, it won’t stop the misuse of any of your active credit accounts. A fraud alert is in place for a year and won’t impact your credit score.

If you have questions about credit freezes and how they can affect the mortgage process, give our Katy mortgage lender team a call today!