27 JANUARY, 2022

Are you worried about hackers and scammers conning you with opening the credit account in your name? Scammers can take up loans and credit cards in your name and not pay them back which can leave you in a pile of debt. This may even make you go bankrupt and affect your credit score negatively, thereby impacting your future eligibility for taking any personal loan or credit card.

We all are living in a hostile digital environment where we are at the risk of data or identity theft anytime, anywhere. However, with the awareness of the right moves and wise strategies, you can protect your credit information and report from these hackers. Two of the best ways to guard your information from hackers are – credit freeze and credit lock. These two terms are often used interchangeably because of a few minor differences between them. Let’s understand them in detail here.

 

Credit Freeze & Credit Lock – Meaning

Credit freeze and credit lock work in the same manner as they both restrict one’s access to the credit report. The restricted access to credit reports and information helps you protect from any cases of identity theft or fraud. Lenders or creditors can’t access your credit report if you lock or freeze your credit file. To get your credit file unlocked, you need to get in touch with the major credit bureaus in India - CIBIL, Experian, Equifax, CRISIL, ICRA, and CRIF High Mark.

 

Steps to Freeze/Unfreeze Your Credit

Freezing or unfreezing your credit information is easy and anyone can do it with the following steps:

  • Request for a credit freeze with any of the credit information bureaus
  • Input your personal information for verification
  • Receive a PIN to be provided later when you wish to unfreeze your credit
  • Manage your credit freeze/unfreeze

In future, when you wish to unfreeze the credit and are unable to provide the PIN, you can still do so by providing additional verification information. The process of freezing the information takes from one hour up to 24 hours and is entirely free of any cost to the user.

 

Steps to Lock/Unlock Credit

  • Download the respective credit bureau’s app or visit their website
  • Log in to the website/app with your username and password
  • Access Lock/unlock feature in your profile, initiate the required action with a tap.

Compared to a credit freeze, credit lock is an easier and quicker procedure that can be done in an instant via your smartphone. It also makes it easier for a user to quickly unlock the credit data when a lender or bank is trying to access the credit file.

 

Credit Freeze vs. Credit Lock – Simplified

Parameter

Credit Freeze

Credit Lock

Security

This is protected by a PIN provided by the credit bureaus

This is protected by your username and password

Cost

Free

There is a cost incurred

Trigger to Use

This is initiated when you believe there’s theft on your personal information

This is initiated as a preventive measure to safeguard your credit information

Process

Email or call your credit bureau to generate a PIN to be used later to freeze/unfreeze your credit file

Login to the credit bureau’s app or website with username e and password to activate/deactivate the credit lock feature

 

Why is Credit Freeze a More Secure Option?

Though credit lock or unlock is a much quicker and easier option than a credit freeze, choosing the latter is a far more secure option to ward off any potential case of credit theft. Read on to know why:

  • Credit freeze option, being regulated by the Federal Law, is a far more secure option over credit lock. While, on the other side, a credit lock is just a contract between you and your credit bureau. Credit lock contracts are often believed to be having terms and conditions that might not work in a user’s favour like the clause of arbitration that stops you from filing a lawsuit. Additionally, if a hacker or fraudster tries to access your credit information while your credit account is frozen, you stand a better chance of protection against the resulting liability.
  • When it comes to the cost to the user, credit freeze definitely has an upper hand since it is free of cost. The procedure to initiate a credit freeze, being governed by Federal Law, doesn’t carry any cost and provide enhanced security when compared to credit lock.

Now that you are well aware of the difference between a credit freeze and a credit lock, deciding the one that works best for you shouldn’t be a difficult choice. The option of choosing between both depends on several factors. If you’re the one that opens a new credit quite frequently, a credit lock might work better in your favour as you can control them at your fingertips. For the rest, a credit freeze is a better and safer option in the longer run. Keeping both in hand, always make sure to check your credit report periodically to rule out any possible incidents of credit card fraud or identity theft issues.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.

Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.