Why a Credit Freeze Alone Won't Stop Identity Theft

Scammers have found new ways to steal from you during the pandemic. Here's what you can do.

illustration of frozen credit card Illustration: Getty Images

Even as the coronavirus pandemic starts to recede, many forms of identity fraud have continued to escalate

“Scammers continue to find new ways to connect with victims and steal their personal information,” says John Buzzard, lead fraud and security analyst at Javelin Strategy & Research. 

Last year 15 million consumers fell victim to traditional identity fraud, with losses totaling $24 billion, up 79 percent from the previous year, according to a recent study from Javelin. One category, account takeover fraud, when criminals steal login and password information and “take over” financial accounts, increased 90 percent in 2021.

That’s why it’s still essential to put a credit freeze on your accounts, which can prevent someone from accessing them and ripping you off.

“The best way to keep your financial accounts secure from fraudulent use is to freeze them,” says Syed Ejaz, a financial policy analyst at Consumer Reports.

But a credit freeze alone can’t protect you from everything. A criminal could still obtain your Social Security number or driver’s license information, steal your tax refund, take out loans in your name, or hijack other accounts.

Scammers may also reach out by email, calls, and texts. And it’s important to be extra careful with logins, passwords, and social media, says Buzzard. We’ve outlined a number of ways to protect yourself below.

More on ID Theft

Resolving identity theft issues may mean spending hours on the phone with banks, the police, and government agencies. It can also prove costly due to lost hours from work, legal fees, and other expenses, says Eva Velasquez, president and CEO of the Identity Theft Resource Center (ITRC), a nonprofit group that helps fraud victims.

And for complex cases, the process could take months or even years. As a recent survey by ITRC found, 75 percent of victims of pandemic-related identity fraud in 2020 said their issues were unresolved as of April 2021.

The good news is that setting up a credit freeze is free and relatively easy to do. Once it’s in place, most lenders are blocked from seeing your credit history, and scammers are less able to open new accounts or loans in your name.

Yet despite the importance of credit freezes, most consumers don’t bother to take that step. As a 2020 survey by CompareCards.com found, almost half of cardholders said they were notified that their personal information was exposed in a data breach over the past year, but only 9 percent had frozen their credit.

But even if you do put a freeze on your credit, there are plenty of ways criminals can come after you. Here’s a look at the risks you still face and what you can do about them.

What a Freeze Doesn't Cover

As a result of data breaches both large and small, hackers may have gained access to key pieces of your personal information, such as your birth date, driver’s license number, Social Security number, and more. That gives them opportunities to scam you in ways that aren’t easy to block.

Here are a few of the more common fraud categories that are reported to identity theft experts:

Tax refunds: By using your Social Security number, scammers can file false income tax returns in your name and claim refunds, a problem that has surged during the pandemic. Your best defense is to e-file using an Identity Protection PIN, which will block scammers from using your info to claim a refund. You must opt in, however. 

Driver’s license: If fraudsters gain access to your driver’s license number, they can create fake licenses, which can be dinged with their moving violations. By adding in other personal information from data breaches, identity thieves can design bogus checks to pay a cashier, who is conned into verifying the shopper’s identity by writing your license number on the counterfeit check.

Health insurance: Identity thieves can use your information to fraudulently claim healthcare benefits from private health insurance, Medicare, or Medicaid. In some cases, they may use your insurance information for coverage, but in others, they may tell a provider to send the bill to your address, Velasquez says.

P2P scams: When you use a peer-to-peer (P2P) payment app, you generally lack the fraud protections that you get with a credit card, which means you may not be able to recover money sent to the wrong person or to a scammer. As payment apps have grown in popularity, incidences of P2P new account fraud rose 18 percent in 2020 to 29 percent in 2021, according to Javelin.

Child identity theft: Identity thieves may get hold of a child’s Social Security number and use it to apply for government benefits, open bank and credit card accounts, or rent a home. The fraud may not be discovered until the victim is older, perhaps because he or she is rejected for a loan or credit card due to damaged credit.

ID Theft Protection

If you think your information has been stolen or may be exposed, you can get free assistance from the Identity Theft Resource Center, which helps victims resolve a wide range of scams, fraud, and other forms of ID theft.

As additional protection, you might consider purchasing identity theft coverage. Depending on the level of coverage and the particular offerings, these services can monitor your identity, scan the dark web for your information, and help you restore your identity. Costs for this coverage may run from $10 to $30 a month.

To be clear, ID theft protection won’t prevent fraud, and you can do many of these tasks yourself, such as setting up account alerts, as we explain below.

But if you’re trying to resolve an issue and you’re feeling overwhelmed, having someone help may be useful, says Javelin’s Buzzard.

Be sure to check the terms of coverage so that you’re getting the features you want and you aren’t paying for those you don’t want, Velasquez says.

Before you sign up, check to see whether you might already have some form of this service free. Identity theft coverage is sometimes offered as part of an employer’s benefits package or a credit card benefit, or it might be included in your homeowners insurance.

How to Protect Yourself

By creating your own safeguards, you can greatly reduce your risk of fraud or identity theft. Here are three key steps:

1. Sign up for account notifications. Many financial services firms will let you set up notifications via text and email that alert you about activity in your account. That way, you’ll get a heads-up that unauthorized transactions are taking place. Make sure you have your alerts turned on and review your statements regularly.

2. Check your credit report. Keeping tabs on your credit file will help you spot any accounts that aren’t yours, and identify and correct errors that might hurt your credit score.

You can get a free weekly report from each of the three major credit bureaus until the end of the year; after that, you can get one from each annually for free. Go to annualcreditreport.com.

3. Add extra layers of security. A growing number of companies, including tech firms and brokerages, offer two-factor authentication, which requires you to validate your identity before accessing your account. You may have to enter a code provided by text or email, for example, or use a physical security key or security tokens.

And don’t forget to use strong passwords or a password manager for your accounts.


Photo of CR Money editor, Penny Wang.

Penelope Wang

I cover everything from retirement planning to taxes to college saving. My goal is to help people improve their finances, so they have less stress and more freedom. What I enjoy: walks through the city, time with family, and reading mysteries, though I rarely guess who did it. Follow me on Twitter (@PennyWriter).