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LSDefine
Simple English definitions for legal terms
credit freeze
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A quick definition of credit freeze:
A credit freeze is when you ask the government to stop anyone from looking at your credit report. This means that no one can open a new credit account in your name without your permission. It's like putting a lock on your credit so that no one can use it without your key.
A more thorough explanation:
A credit freeze is a government-mandated restriction on bank-lending. During a credit freeze, banks are not allowed to lend money to individuals or businesses. This is done to prevent economic instability and protect consumers from taking on too much debt.
- During the 2008 financial crisis, the US government implemented a credit freeze to prevent banks from lending money to risky borrowers.
- In some cases, individuals may choose to initiate a credit freeze on their own credit reports to prevent identity theft and unauthorized access to their credit information.
These examples illustrate how a credit freeze can be used to protect the economy and individual consumers from financial harm.