You can now freeze your credit for free—here's one situation when you definitely should

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Freezing your credit report used to cost money — up to $60 plus fees, including the cost of later removing the freeze. But now, thanks to an amendment to the Fair Credit Reporting Act in effect as of Friday, you can do it for free.

A credit freeze is a protective measure. It blocks a lender or financial institution from checking your report, so a hacker is unable to use your information to open a new bank account or take out a loan. The only real downside is that it's a minor inconvenience, because you can't open a new account or take out a loan either. A freeze doesn't affect your credit score, though, or your ability to use your credit card.

Many consumers are left wondering when, if ever, to make use of this complimentary service. One clear answer: At the first whiff of danger.

"The most obvious time to do a credit freeze is if you've been notified by a merchant or bureau that there's been a data breach or that your information may have been compromised," Ashley Dull, credit strategist at, tells CNBC Make It. "This new law makes it a lot easier to take preventative versus reactive measures in these cases."

The new legislation was passed after the major credit bureau Equifax was hacked in the summer of 2017, exposing the personal data of 148 million consumers to potential fraud. That's roughly 44 percent of the U.S. population. And yet, in the year since, one study found that only 8 percent of consumers have protected themselves by freezing their credit.

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Now that the service is free, some consumer advocates recommend being proactive and freezing your credit whether or not there's cause for concern.

"Think of a credit freeze as a state-of-the-art home security system that helps keep the bad guys out, versus credit monitoring, which is more like that text message you got from a neighbor after someone already smashed through your living room window and walked off with your big-screen TV," says industry analyst Ted Rossman. "In the latter case, the damage has already been done, so the alert isn't all that helpful."

Freezing your credit is relatively easy. After you contact each of the three bureaus — Equifax, TransUnion and Experian, for which contact information can be found here — you'll receive a personal identification number, which you'll need to hold onto until you're ready to temporarily or permanently "thaw." That process is also now free and, according to the new law, it's supposed to take less than hour. 

Rossman recommends allowing more time than that for the thaw to go into effect, though, just to be safe. "For example, if you're planning on car shopping soon, I'd lift the freeze about three business days before applying for an auto loan," he says. "That gives you a grace period in case you hit an unexpected delay. You don't want to be stuck twiddling your thumbs in the finance manager's office at your local car dealership."

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