If you placed a security freeze on your credit report after the Equifax data breach, be prepared to temporarily remove it.
Unlike a credit monitoring service, a credit freeze prevents new creditors from reviewing your credit report and allowing accounts to be opened in your name.
Expect to be required to unfreeze your credit report when you apply for a loan or a credit card. Others — like your bank — may also ask you to lift your security freeze.
Why banks review credit reports
Banks and credit unions review credit reports for various reasons.
Financial institutions may check your credit if you’re enrolling in overdraft protection, according to TransUnion, one of the major credit bureaus. This may be the case if you opt for an overdraft line of credit, which allows you to borrow money to cover a transaction when there aren’t enough funds in your checking account.
You’ll pay interest on the amount loaned to you from an overdraft line of credit. As a result, a bank or credit union may want to pull your credit report.
“Because of the nature of an overdraft line of protection — and the fact that it can extend a good bit beyond the limit of your account — it makes it necessary for lenders to make sure you’re creditworthy before they approve you for that product,” says Bruce McClary, vice president of communications for the National Foundation for Credit Counseling.
Even if you’re not enrolling in overdraft protection, a bank or credit union may pull your credit report to confirm you are who you say you are.
“Information from credit bureaus helps us verify identity and identify potential risks based on their established credit history,” says Scott Navarro, senior operations manager at Alliant Credit Union.
Unfreezing your credit report to open a bank account
Not all banks and credit unions pull credit reports. They may pull a report instead from a consumer agency like ChexSystems that can confirm whether you have a history of bouncing checks and mismanaging your bank accounts.
Some institutions only pull credit reports for certain types of accounts. Alliant doesn’t pull credit reports when you’re opening a CD, Navarro says. But the Chicago-based credit union can pull credit for new membership openings and existing members opening checking accounts.
Ally Bank also pulls credit reports for some new and existing customers. Depending on your circumstances, you may need to lift your security freeze before opening an account.
“We review the customer’s application and if certain criteria are met, we will proceed with the account opening without lift of the customer’s credit freeze,” the bank said in a statement. “However, if we determine that additional verification is required, we will contact the customer directly and may ask the customer to lift the freeze for a short period of time to enable us to confirm our customer’s identity.”
Before applying for an account, ask your bank whether you’ll need to unfreeze your credit report. If your report isn’t available, your application could be put on hold or delayed, says John Ulzheimer, credit expert and president of the Ulzheimer Group.
You should also ask which credit bureaus your bank works with. UFB Direct, an internet bank, has a relationship with Experian, TransUnion and Equifax. If you froze your credit reports at all three bureaus, you would need to temporarily remove all of them before opening an account.
Another question you should ask is whether your bank uses a soft or hard pull to check your credit. A soft pull won’t affect your credit score. But a hard pull can have an impact on it depending on the other credit inquiries on your report, McClary says.
How to unfreeze your credit report
Ulzheimer and McClary recommend planning ahead if you’re preparing to open a bank account and your credit report is frozen. Put in a request to unfreeze it at least 24 to 48 hours before starting an application.
Find the PIN number you used when you placed the freeze. Then visit each credit bureau’s website or call to temporarily thaw your credit report. You can decide how long you want your credit information to remain unfrozen or whether you want the freeze lifted for a specific lender.
Fees for unfreezing credit reports vary by state, generally ranging from $3 to $10. In some states, it costs $12.