Credit Lock Vs Credit Freeze: What's the Key Differences?

What is a Credit Freeze?

Credit freeze refers to a temporary limitation placed on an individual’s credit report. During the freeze period, no one can take a new loan or open a credit account, not even the account holder. It is an excellent way to safeguard credit after an instance of identity theft. 

How Does Credit Lock Work?

Credit lock prevents a finance company from assessing an individual’s credit history and lending new loans in their name. It is a contract between the individual and the credit reporting agency without legal protection. It is quicker and more convenient than a credit freeze, as an account holder can quickly lock or unlock it online. However, the facility costs money, and an individual must enrol in a program with the credit bureau. Since the user can immediately lock or unlock the credit, keeping it locked at all times is recommended. One must unlock it only when they plan to apply for a new credit product. 

Also Read: What is a Good CIBIL Score for Personal or Business Loan

How Does Credit Freeze Work?

A credit freeze, also called a security freeze, seals an individual's credit history to prevent financial fraud or identity theft. It makes credit information inaccessible until the owner removes the freeze or thaws their credit. When a fraudster tries to open a new credit account, the credit freeze prevents the finance provider from accessing the owner’s credit information. Ultimately, it prevents fraudsters from opening unauthorised accounts in an individual’s name without their knowledge. Credit freeze facilities are free for everyone regardless of whether they face fraud. 

Credit Lock Vs. Credit Freeze - Key Differences

Many individuals feel confused between credit lock and credit freeze. However, understanding credit lock vs freeze is essential to determine which the right option is:

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How Credit Lock and Credit Freeze Affect Your Personal Loan?

After understanding credit freeze vs lock, many people would want to know how they impact their Personal Loan. Here’s an outlook:

• Credit lock and credit freeze do not affect an individual's credit score.
• When a potential borrower applies for an online Personal Loan, credit providers access their credit report to determine their Personal Loan eligibility. However, since the credit file is locked, they cannot extend credit to the applicant.
• Before applying for an online Personal Loan, applicants must unlock or thaw their credit file to help lenders determine their Personal Loan eligibility.

Also Read: How To Check Your Current Cibil Score By Aadhar Card?

Conclusion

Once active, credit lock and credit freeze prevent anyone from reaching an individual’s credit file, stopping fraudsters from taking loans or opening new accounts in the account holder’s name. Therefore, they are excellent security measures to protect credit data. After understanding credit lock vs credit freeze, choosing a security system more appropriate for their requirement and situation is easy.

Also Read: What is CIBIL Report - CIBIL Meaning and Calculation

Frequently Asked Questions

1. Is a credit freeze the same as a credit lock?

No, they are different. Understanding credit lock vs freeze is essential to make an informed decision.

2. How long does a credit lock last?

A credit lock is a temporary facility that lasts only a few days.

3. Is freezing your credit a good idea?

A credit freeze is excellent if an individual suspects identity theft and wants to make their credit file inaccessible.

4. What is credit lock status?

Credit lock status is whether a person's credit file is locked or unlocked.

5. What is the purpose of a credit lock?

The primary purpose of a credit lock is to make the credit file inaccessible, preventing a fraudster from opening a new account or taking a new loan in the account holder’s name.