What Is a Credit Freeze and Is It Coming to Canada?

May 1, 2020 Credit Score

Around 27,000 Canadians report identity theft each year. There are similar issues in the United States, so much so that in May 2018, the U.S passed a law to mandate free credit freezes as a means of fraud protection. As of 2020, you still cannot get a credit freeze in Canada.

Read on to learn more about what credit freezes do, the current credit landscape in Canada and how you can protect yourself against identity theft.

What is a credit freeze?

When a credit card owner freezes their credit, it locks their file. This means lenders, fraudsters or even the account owner can’t open the account or ask about the file until the credit card owner unlocks the freeze. Unfortunately, this service is not yet available to Canadians.

There are pros and cons to credit freezes. They’re good because the credit card owner is in control—they can prevent identity theft from happening and protect their personal information from scammers.

On the flip side, credit freezes are essentially useless if your information has already been compromised. It prevents new credit from being opened but if a scammer already has your account number or other personal information, they can still use your card to make purchases or sell your information. When you freeze your credit, you’re also given a PIN that will allow you to freeze/unfreeze your account. But what happens if that information gets stolen too?

There’s a lot of factors—both good and bad—that come with credit freezing and other alternative fraud protection. Let’s have a look at the impact it has in Canada.

What is the current credit landscape in Canada?

In a 2019 CBC Marketplace investigation, CBC reportedly reached out to all Canadian provinces and territories and most don’t have plans to introduce legislation around identity theft and fraud issues. In August 2019, Quebec proposed a bill to let consumers freeze their credit files. But even though provincial and territorial governments have the power to mandate credit freezes, no action has been taken (at least not yet).

In the meantime, Canadians can use anti-fraud protection services from credit reporting bureaus Equifax and TransUnion. They offer “credit monitoring” that ranges from $11.95 to $29.95 monthly depending on the plan. With credit monitoring, customers will receive email notifications when notable changes are made to their credit reports, including new inquiries or new accounts opened. However, the CBC Marketplace investigation tested these services and reported they only received emails from one credit bureau, not both, which could be problematic if suspicious activity is being overlooked. Let’s break down the services offered by Equifax and TransUnion.

How can Canadians protect themselves against identity theft?

Credit reporting bureaus Equifax and TransUnion both have programs in place to protect Canadians from fraud and identity theft. Let’s take a look at what services they offer.

Equifax Alerts

Equifax offers two alerts you can put on your Equifax credit report to keep your personal and financial information protected:

Identity Alert. When you use an Identity Alert, you attach a personal statement and phone number to your credit report. If you live in Manitoba or Ontario, lenders legally have to speak with you directly before opening credit. If you live elsewhere in Canada, lenders are encouraged to call you directly, though it’s not legally required. An Identity Alert stays on your credit report for six years and must be opened and cancelled in writing. Canadians are also required to provide two forms of photo identification.

Fraud Warning. A Fraud Warning is only available to confirmed victims of fraud or identity theft. The statement will be added to your credit report and remain for six years and it will encourage lenders to phone you before opening new credit. Fraud Warnings must be placed through Equifax’s call centre and Equifax may have to complete a fraud investigation. To remove a Fraud Warning, you can send a written request along with two pieces of photo identification.

TransUnion Alerts

TransUnion offers one alert you can add to your credit file:

Potential Fraud Alert. If you think someone has fraudulently used your account but it hasn’t been confirmed, you can put a Potential Fraud Alert on your file. Having this on your file will tell potential lenders that you may be a victim of fraud and prompt them to contact you over the phone. You can arrange for the alert over the phone, online or in writing and it will stay on your file for six years. You also have the option to put a Potential Fraud Alert on your social insurance number. If fraudulent activity is confirmed, you can place a Confirmed Fraud Alert on your TransUnion credit file.

What can you do to keep your personal information protected?

Until credit freezes are available in Canada, here are some easy things you can do to prevent identity theft:

Check your credit card statements. Staying on top of your credit card bills will help you in the long run. Before paying your bill, read through the purchases and ensure they make sense to you. If anything seems fishy, give your bank or credit card provider a call to flag the issue.

Don’t share your PIN. This seems like a given but we’ll say it again—don’t share your PIN with anyone. This reduces the risk of your information being stolen.

Create unique passwords. Even if it’s easier to remember, avoid using the same password for multiple accounts, especially if they contain personal or financial information. The more variety in your passwords, the less likely someone will be able to hack your information.

Use a password manager app. If you store passwords on your phone, try using a password manager app instead of a notes document. There are plenty of great options including 1Password or Dashlane that will keep your passwords protected and accessible in one place.

If you have any credit questions, our credit experts are online and ready to help. You can live chat with us on our FAQ page or if you’re ready to apply for a vehicle loan, check out our online Car Loan Application.

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