Data breaches and financial fraud are so common these days that you need to be extra cautious to protect your money. Scammers, these days, are very shrewd. Their illegal activities have landed many in a financial scoop. They can use your information to obtain a bogus credit card or a new loan account, or they can also open a duplicate bank account. Such activities not only put you on financial risk, but they can also affect your credit score and land you in jail.
Credit bureaus offer two options to protect your details: credit freeze and credit lock. Many people believe they can be used interchangeably, but this is incorrect. Continue scrolling to know the difference between them.
What is a credit freeze?
A credit freeze is a safeguard used to prevent financial fraud. During this process, you must request that various credit bureaus in the country refrain from sharing your personal and financial information with a third party.
Once the credit bureaus accept your request, no one, not even a reputable financial institution, will be able to access your information.
How does credit freeze work?
A credit freeze will only be initiated after you request it. A credit freeze's primary function is to prevent identity theft. It prevents scammers or unauthorised third parties from accessing your information.
Here is a real-life example of how a credit freeze works -
Assume you are a salaried employee with a credit card. You frequently use this card at the nearest grocery store, which is essentially a chain outlet of some major brand. You recently read in the news that a day ago, scammers stole the personal information of that grocery store's customers.
You realize that scammers might attempt to steal and clone your sensitive data to defraud you financially. In this case, you immediately notify your financial institution to block your existing card and provide you with a new one. Next, you send in writing to different bureaus with evidence to avoid sharing your data with any person/financial institution/company.
How can you freeze your credit?
A credit freeze can be obtained in three ways. You can do it online through the credit bureau's website, by calling their customer service number, or by mailing it to the bureau's official email address.
When submitting your request for a credit freeze, you must provide various documents. Some of them include government-approved identity cards (Aadhar card, PAN card, or government-issued job identity card), address proof, etc.
Does a credit freeze impact your credit score?
No. Even after you have frozen your credit, your credit score remains unaffected. This procedure does not prevent you from using revolving credit lines such as
line-based personal loans, credit cards, and so on. You can also improve your credit score by making on-time payments on your existing debt EMIs. The only restriction that a credit freeze imposes is that you cannot apply for any new loan products because lenders are not permitted to conduct a hard inquiry.
What is a credit lock?
A credit lock is a web-based or app-based service provided by various credit bureaus. This function protects your credit information from being accessed by a third party. Under credit lock, all that is required to protect your data is a unique username and a somewhat complex password.
Some credit bureaus' credit lock feature goes beyond simply protecting your information. If you choose the premium feature, you will receive monthly reports from all bureaus, notifications when a new credit activity or unauthorised act is detected on your account, and expert assistance with fraud resolution.
How to lock your credit?
You can lock or unlock your credit by following just three simple steps outlined below:
Step 1: Visit the official website of the credit bureau or download their app from the Google Play Store or App Store.
Step 2: Log in to the app by entering the username and password.
Step 3: Navigate to the lock/unlock feature and with a single tap, activate the credit lock.
Credit Lock vs. Freeze: Key Differences
Credit locks and freezes both help to secure your data and prevent financial fraud. But, as you can see from the preceding sections, they are both very different in practice. Check out the table below for a quick breakdown of their key differences.
| Parameters | Credit Freeze | Credit Lock |
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| Charges | You will have to pay a fee to have your credit frozen. | Credit bureaus provide this service for free. |
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| Security | You must use a PIN to freeze your credit. | You must create a unique username and password to complete the credit lock process. |
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| Activation Process | You can request a credit freeze by writing to the bureau using their official email address or by visiting their website. | You can activate this feature with just a few finger-taps by entering your username and password. |
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| Activation Time | The credit bureau in question will freeze your credit within 24 hours of receiving your freeze request. | Activation only takes a few seconds. |
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| Documentation | You must provide your KYC documents at the time of submitting a credit freeze request. | The document process is not stringent. |
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| Deactivation | Credit unfreezing takes time. And, if a financial emergency arises and you require immediate funds through a personal loan, you may have to wait for days before making your application. | You only need to login into your account and choose the unlock option to complete the deactivation process. |
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| Regulated | They are governed by the law. | They are not governed by the law. |
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Also Read: Remember These 7 Things To Keep Your Online Transactions Safe To conclude
Credit locks and freezes serve the same purpose: they protect your personal and financial information from data breaches. However, if you require regular funding assistance from a financial institution, a credit lock is preferable due to the ease of lock activation and deactivation. Another piece of advice is to review your credit report at least every six months. It will keep you updated on whether or not you have been the victim of a scam.
