Credit freeze in Canada

Identity theft is scary. And it happens a lot in Canada. In fact, the Canadian Anti-Fraud Centre estimates one in five Canadians fall victim to identity theft. Between 2020 and 2021, fraud and cybercrime in Canada rose by a whopping 218 percent.

If a fraudster manages to steal your identity and open up a bank account or credit card or take out loans in your name, you could be in for all sorts of headaches and your credit score could take a major dive.

Keeping your identity and credit safe is critically important to your financial health. So what can we do in Canada to protect our identity? A credit freeze is one option, but it’s not available to everyone. Read on to learn more.

What is a credit freeze?

A credit freeze, also known as a credit lock or security freeze, is a freeze on access to your credit report. If someone were to steal your identity and approach a lender to try to open a credit card in your name, the lender would conduct a credit check to ensure “you” (in this case, the fraudster posing as you) had a good credit score and were worthy to lend to. But, if you had a credit freeze in place, the credit check would be flagged and likely fail.

A credit freeze prevents the credit bureau from sharing your credit information. It is a way to protect you from fraud and protect your credit score. In Canada, there are two consumer credit reporting bureaus, Equifax and TransUnion. Both bureaus are able to put credit freezes on your account, but are not required to do so. Currently, legislation is required to enforce consumer protection through credit freezing.

Are credit freezes available in Canada?

Technically, yes, credit freezes are available in Canada. But not everywhere. If you live in Quebec, congratulations, you are able to put a credit freeze on your credit. If you live anywhere else in Canada, sorry, you can not.

While both Equifax and TransUnion allow credit freezes everywhere in America, they have not extended that to Canada. Quebec introduced legislation for Quebecois, but so far no other provinces or territories have followed suit. On February 1, 2023, the Credit Assessment Agents Act came into force in Quebec.

How does it work in Quebec?

If you want to place a credit freeze, you need to contact Equifax and TransUnion separately. With each credit bureau, you can place, temporarily suspend, and remove a credit freeze free of charge. You can do so online or by phone. Once placed, a credit freeze remains on your account until you request it to be removed. Neither placing nor removing a credit freeze has any impact on your credit score.

A credit freeze will prevent creditors from receiving any access to your credit information, including for enquiries:

• To assess you for new credit or additional credit, like loans or credit cards

• To open a long-term lease contract, like a car loan

• To open ongoing service plans, like cell phone contracts

When you need creditors to legitimately run credit checks – when you want to open a new credit card or loan, for example – you simply need to remove the freeze. You need to do this with both credit bureaus, as some creditors use one bureau and some use the other. With Equifax, you can temporarily suspend your credit freeze for a matter of weeks or months, as needed, before it will re-freeze.

Benefits of a credit freeze

It’s obviously worth mentioning that a credit freeze is not a failsafe to prevent you from experiencing fraud. It also can’t protect your accounts that are already open and active. Nonetheless, they are a useful tool against fraud and are worth your consideration (if you live in Quebec).

A credit freeze makes fraud difficult. When creditors try to run a credit check on your account and are unable to because of a freeze, most will not proceed with their process. Without access to your credit report, lenders are unlikely to authorize credit for anyone who might be pretending to be you.

Credit freezes are also free, they don’t expire, and they don’t impact your credit score. There’s a lot to like about them, really. If only they were more widely available throughout Canada.

How else can you protect yourself against identity theft?

If you don’t live in Quebec, what other options do you have to protect your identity? There are things you can do – though nothing else likely offers as much protection as a credit freeze.

Keep your information safe

One thing you can always do is keep your personal information safe. Don’t share your passwords or logins with others. Don’t share personal info on social media or elsewhere online, such as addresses, family members’ names, your date of birth.

Fraud alerts

In lieu of access to credit freezes, another option offered by both Equifax and TransUnion is fraud alerts. You can sign up for alerts online or by email or phone. A fraud alert is basically a flag on your account, so when lenders are enquiring into your creditworthiness they are alerted. They must then take extra steps to confirm your identity before approving you.

Equifax

Equifax has two types of fraud alerts. The first is called a Fraud Warning. Fraud warnings are only available to confirmed victims of identity theft. The warning is placed on your credit report for six years and encourages (though does not legally enforce) lenders to call you before extending any credit under your name. The second is called Identity Alert. Identity alerts are optional and also place a flag and phone number on your credit report. In Ontario and Manitoba, lenders are legally required to call you before extending credit (elsewhere in Canada, they are encouraged to call). Alerts also stay on your credit report for six years, unless you choose to remove them.

TransUnion

TransUnion has an alert option for people who suspect fraud, called Potential Fraud Alerts. If you think you may become a victim of fraud (for example, your wallet was stolen), you can set this up on your credit file. This will also provide lenders with a flag on your credit report and tell them to call you before extending credit.

Review transactions

Make sure you stay on top of your finances, including transactions on all your accounts. Each month, go through your credit card and bank transactions to spot any anomalies. Contact your creditor immediately if you notice something you suspect to be fraudulent. If you stop receiving your monthly statements, you should also alert your creditor, as this can be a sign a fraudster has changed your contact details.

Credit monitoring

Credit monitoring will alert you if your credit report changes with any new activity, like a new account opened in your name, late payments reported by creditors, and hard enquiries on your file. You can sign up and pay for credit monitoring through both Equifax and TransUnion. Their plans cost between roughly $20-$30. Credit monitoring can’t prevent fraud from taking place, but it can help you stay on top of your credit and take action quickly if you notice fraud on your credit report.