Monday, July 18, 2005

Are Security Freezes A Good Idea?

An article I just read from the San Francisco Chronicle bothered me enough to comment on it.

The headline is:

"New Credit-Freeze Laws Could Backfire"

Below that, the subhead reads:

"In California and Texas, you can seal your credit report from prying eyes. It's a way to thwart identity theft - but lenders say it also could mean losing your dream house."

The opening sentence reads:

"The law of unintended consequences may be striking again, this time with state laws that allow consumers to freeze their credit files, according to some mortgage professionals who say the rules could prevent borrowers from snapping up a low loan rate or jumping on fast-selling houses."

Notice the emphasis on "could." I doubt the critics of the security freeze could cite one instance where someone lost their "dream house" due to the dreaded security freeze.

First, as a matter of logic, the rules "permitting" security freezes are not going to "prevent" borrowers from getting anything. The consumer must first decide to place a security freeze - not any easy thing to do, and most likely the result of identity theft. The rules permit a security freeze, they don't impose it.

According to the artile officials of the National Association of Mortgage Brokers warned at their annual convention in Minneapolis last month that so-called credit-freeze laws could backfire because their members will be unable to generate credit scores for their clients.

Secondly, it was my impression that lenders in the U.S. right now, are, if anything, able to lend too much, too easily. Aren't consumer debt and housing at an all time high? My point being, is waiting five days for a loan really too much?

But sure, I'll concede anyone in the process of buying a home should probably see to it that any security freeze they do have is lifted.

Even if you buy a new house every 10 years, that would still leave 9 years and 11 months to have freeze and not worry about losing your dream house.

Anti-freeze types say that people might forget they ever had a freeze placed on their credit reports. It's possible, I suppose, but consumer education should help with that.

The article makes a good point quoting Fraud prevention consultant Robert Siciliano, of Safety Minute Seminars in Boston, who says identify theft "has a much better chance of gumming up the process than a credit freeze ever will."

Considering credit reports are key to identity theft, consumers are going to want, and need, more control how their reports are used and disclosed.


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