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The credit reports on file at the three credit bureaus—Equifax, Experian and TransUnion—are your personal financial résumé. One of the best ways to protect yourself from identity theft is to freeze your credit reports so unauthorized people can't sneak a peek. That can be incredibly helpful when an identity thief is attempting to get a credit card or a loan using your name and financial information. Any time a credit card issuer or lender wants to size up how good a customer you're likely to be, they check your credit report. If they can't see it, there's very little chance they would consider offering you—or someone impersonating you—a new card or loan.

Criminals who gain enough personal data about you—a Social Security number, a birth date, a current address—can apply for cards or loans as if they were you; the business assessing their application checks your credit report. If the request is approved, that's when your financial life becomes a nightmare. It can be months or years until you realize someone is masquerading as you and has, in effect, ruined your credit. Many people find out the horrible news when they're applying for a home or car loan and are shocked to realize their credit is a mess because of the thief who has run up all sorts of unpaid debt in their name.

If you put a freeze on your credit report, it means virtually nobody—not a credit card issuer, lender, or even a prospective employer—can view it until you personally "lift" the freeze and grant them access. Even if a thief steals some of your personal info, their plans will be thwarted as soon as they try to pose as you and the lender can't take a look at "their" credit report.

The bad news is that not all states allow them and, to be honest, it can be a bit cumbersome to initiate one. That said, once you have the freeze in place, you typically just need to make one phone call or go online to lift it. When you're in the market for a mortgage or credit card, you can temporarily remove the freeze to let a creditor see your report.

Find out if your state allows credit freezes.
Please note: This is general information and is not intended to be legal advice. You should consult with your own financial advisor before making any major financial decisions, including investments or changes to your portfolio, and a qualified legal professional before executing any legal documents or taking any legal action. Harpo Productions, Inc., OWN: Oprah Winfrey Network, Discovery Communications LLC and their affiliated companies and entities are not responsible for any losses, damages or claims that may result from your financial or legal decisions.

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