Freezing credit reports and opening CDs

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Happy2BeFree
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Freezing credit reports and opening CDs

Post by Happy2BeFree » Fri Mar 09, 2018 3:15 pm

For those of you who have frozen your credit reports (including Innovis and Chex) and yet still want to take advantage of higher-rate CDs, what have you decided to do:

1. Go through the hassle and pay the fees to unfreeze/refreeze one or more credit reports, possibly several times per year, to fund your CDs,

or

2. Choose to use bond funds instead, even though you may not make as much, and may even risk losing money (in the short term) in this rising-rate environment.

I'm on the fence about this, as I feel more comfortable with CDs than bond funds, but I want to simplify my financial life, not complicate it with extra hassles and fees. I'm currently with a couple online banks and CUs (joined before the freeze), so if I wanted direct CDs, I guess I could make do with lower rates.

I'm also considering brokered CDs at Vanguard, but they're not as good a deal as direct CDs. The easiest route would be bond funds, but in this environment, I just don't know if they make sense.

Any feedback would be great. Thanks!

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whodidntante
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Re: Freezing credit reports and opening CDs

Post by whodidntante » Fri Mar 09, 2018 3:24 pm

Are taxes a concern?

I use a stable value fund and total bond market in tax deferred. But if I wanted FI investments in taxable, I would buy series I treasury bonds or t-bills. Those pay favorable rates and are exempt from state tax. The I bond is also tax deferred. I would not buy a bond fund.

Happy2BeFree
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Re: Freezing credit reports and opening CDs

Post by Happy2BeFree » Fri Mar 09, 2018 3:42 pm

whodidntante wrote:
Fri Mar 09, 2018 3:24 pm
Are taxes a concern?

I use a stable value fund and total bond market in tax deferred. But if I wanted FI investments in taxable, I would buy series I treasury bonds or t-bills. Those pay favorable rates and are exempt from state tax. The I bond is also tax deferred. I would not buy a bond fund.
Yes, this is taxable money. I do own some I Bonds from a few years ago, and thought about starting up again. I have a lot to invest, though, so the purchase limits are an issue. My state charges 5% int/div tax, so treasuries could work. Though they yield a bit less than CDs, they might come out ahead because of the state tax exemption. Plus, they're fully liquid, I believe. I also own various bond and SV funds in my IRAs. Thanks for your suggestions!

radiowave
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Re: Freezing credit reports and opening CDs

Post by radiowave » Fri Mar 09, 2018 4:39 pm

The short term Treasury Bills and a bit longer Treasury notes may be another option, both directly available at Vanguard and competitive yields to CDs.
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mbres60
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Re: Freezing credit reports and opening CDs

Post by mbres60 » Fri Mar 09, 2018 5:34 pm

I may be naive but why would opening a CD require a credit check?

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dm200
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Re: Freezing credit reports and opening CDs

Post by dm200 » Fri Mar 09, 2018 5:50 pm

mbres60 wrote:
Fri Mar 09, 2018 5:34 pm
I may be naive but why would opening a CD require a credit check?
I don't fully understand this either?

UpperNwGuy
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Re: Freezing credit reports and opening CDs

Post by UpperNwGuy » Fri Mar 09, 2018 5:53 pm

Bonds for me.

Monster99
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Re: Freezing credit reports and opening CDs

Post by Monster99 » Fri Mar 09, 2018 6:00 pm

mbres60 wrote:
Fri Mar 09, 2018 5:34 pm
I may be naive but why would opening a CD require a credit check?
Credit has been frozen for years, no problem with purchasing CD's....

nalor511
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Re: Freezing credit reports and opening CDs

Post by nalor511 » Fri Mar 09, 2018 6:09 pm

mbres60 wrote:
Fri Mar 09, 2018 5:34 pm
I may be naive but why would opening a CD require a credit check?
Usually if you are joining a new bank or CU they do a credit check, sometimes soft, sometimes hard

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Raybo
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Re: Freezing credit reports and opening CDs

Post by Raybo » Fri Mar 09, 2018 6:13 pm

dm200 wrote:
Fri Mar 09, 2018 5:50 pm
mbres60 wrote:
Fri Mar 09, 2018 5:34 pm
I may be naive but why would opening a CD require a credit check?
I don't fully understand this either?
One of the requirement since 9/11. The Patriot Act?

I have had this problem repeatedly and finally stopped using CDs altogether. Every new bank requires a credit check to open an account.
No matter how long the hill, if you keep pedaling you'll eventually get up to the top.

Puxor
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Re: Freezing credit reports and opening CDs

Post by Puxor » Fri Mar 09, 2018 6:16 pm

FYI, the government is trying to pass a law that would make credit freezing "free" for all.

https://www.cnbc.com/2018/03/08/senate- ... -free.html

You can freeze your credit which should take a day or three through mailing, and the consumers can unfreeze their credits in a few hours.

The argument against it that now it would make it harder for each state to come up with a more restrictive measures to get consumers something better.

annielouise
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Re: Freezing credit reports and opening CDs

Post by annielouise » Fri Mar 09, 2018 6:19 pm

Synchrony did not require unfreezing credit. Ally did. Both were for new accounts. Those are the only two that I checked since freezing. I assume that it would be fine at banks where I already do business, although I haven't tested this yet.

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Kevin M
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Re: Freezing credit reports and opening CDs

Post by Kevin M » Fri Mar 09, 2018 6:26 pm

I'm comfortable with brokered CDs out to three-year maturities, since the early withdrawal penalty on a shorter-term direct CD isn't too valuable. Brokered CDs out to three-year maturities are competitive with direct CDs (maybe even higher yields, and you can usually squeeze out 5-10 basis points extra in secondary market). For example, today I bought a 3-year brokered CD at about 2.8% (after commission), with new issues at 2.7%.

Treasuries are competitive with CDs out to 1-year maturity, even without considering state tax exemption. At my marginal tax rates, Treasury taxable-equivalent yields (TEYs) are slightly higher than new-issue CDs out to 5-year maturity, but maybe slightly less compared to the best deals on the secondary CD market. So Treasuries definitely are worth considering in a taxable account, depending on your state tax rate.

I've gotten the highest TEY on individual AA munis out to 3-year maturity (3% ballpark), but those are available mainly in Illinois, with one or two in other states popping up now and then. I found it interesting that one of my Illinois munis was just upgraded from AA to AA+ (nice it didn't go the other way).

So in my taxable accounts, my most recent purchases are a mix of Treasuries, CDs and munis with maturites from 4 months (a few 4-5 month CA munis were available with TEYs above 2%) to 3 years or so, but in tax-advantaged I've been sticking mostly with brokered CDs out to three years.

The 5-year 4% CD deal that's ending today was great, but I just didn't have the time or energy to mess around with it (I feel a little guilty for not doing so, having been one of the vocal proponents of exactly this kind of CD deal since late 2010).

Kevin
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annielouise
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Re: Freezing credit reports and opening CDs

Post by annielouise » Fri Mar 09, 2018 6:27 pm

Puxor wrote:
Fri Mar 09, 2018 6:16 pm
FYI, the government is trying to pass a law that would make credit freezing "free" for all.

https://www.cnbc.com/2018/03/08/senate- ... -free.html

You can freeze your credit which should take a day or three through mailing, and the consumers can unfreeze their credits in a few hours.

The argument against it that now it would make it harder for each state to come up with a more restrictive measures to get consumers something better.
Eliminates pins. This is crazy dumb. Criminals already have the answers to all the security questions that they ask to verify identify, so without the pin, criminals could easily unfreeze my credit. Makes the whole process useless.

Happy2BeFree
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Re: Freezing credit reports and opening CDs

Post by Happy2BeFree » Fri Mar 09, 2018 6:57 pm

Everyone, thanks for pitching in. You've given me food for thought. I did fill out an application for that Sharonview CD, but it's in limbo right now.

I certainly believe it should be free to freeze, unfreeze, and refreeze our reports, given that our private information was gathered without our consent, then subjected to a massive breach that I'm not even sure has been fixed. So I do hope Congress does right by us.

Kevin, as usual, your ideas are extremely helpful. Thank you for sharing them. I'll learn more about brokered CDs and treasuries. It would be good to consolidate investments rather than having to open accounts here and there. Simplicity and convenience might be worth sacrificing a few extra basis points (though 4% was quite a deal).
Last edited by Happy2BeFree on Sat Mar 10, 2018 6:31 pm, edited 1 time in total.

MrPotatoHead
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Re: Freezing credit reports and opening CDs

Post by MrPotatoHead » Fri Mar 09, 2018 8:00 pm

The Patriot Act does not require the bank to run a credit check(at least it did not, I have not read this legislation in a number of years). It require they know their customer. There are no specifications on how they have to implement it, each financial organization is free to do it any way they wish. In contrast 10K limit on reporting withdraws is stipulated. It is a spirit and intention of complying with the law that they are measured against. Once again I have not read the requirements in some time.

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mfswatz9
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Re: Freezing credit reports and opening CDs

Post by mfswatz9 » Sat Mar 10, 2018 12:13 am

We have had our credit frozen for several years. We are not able to get a CD on line because they require a credit check due to the Patriot's Act. Not required for local banks, credit unions, where you can show driver's licence, etc. It's really a pain in the neck not being able to take advantage of online rates.

THY4373
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Re: Freezing credit reports and opening CDs

Post by THY4373 » Sat Mar 10, 2018 12:32 pm

dm200 wrote:
Fri Mar 09, 2018 5:50 pm
mbres60 wrote:
Fri Mar 09, 2018 5:34 pm
I may be naive but why would opening a CD require a credit check?
I don't fully understand this either?
A frozen Experian report prevented me from opening a BoA checking account a couple of years back. It was giving me a generic error about how my identity could not be verified and to apply in branch. On a hunch I unfroze Experian (the only CR I have frozen) and immediately tried again and it worked. And not it was not a hard pull for checking. Only time i have run into that issue though.

hudson
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Re: Freezing credit reports and opening CDs

Post by hudson » Sat Mar 10, 2018 1:09 pm

Kevin M wrote:
Fri Mar 09, 2018 6:26 pm
I'm comfortable with brokered CDs out to three-year maturities, since the early withdrawal penalty on a shorter-term direct CD isn't too valuable. Brokered CDs out to three-year maturities are competitive with direct CDs (maybe even higher yields, and you can usually squeeze out 5-10 basis points extra in secondary market). For example, today I bought a 3-year brokered CD at about 2.8% (after commission), with new issues at 2.7%.

Treasuries are competitive with CDs out to 1-year maturity, even without considering state tax exemption. At my marginal tax rates, Treasury taxable-equivalent yields (TEYs) are slightly higher than new-issue CDs out to 5-year maturity, but maybe slightly less compared to the best deals on the secondary CD market. So Treasuries definitely are worth considering in a taxable account, depending on your state tax rate.

I've gotten the highest TEY on individual AA munis out to 3-year maturity (3% ballpark), but those are available mainly in Illinois, with one or two in other states popping up now and then. I found it interesting that one of my Illinois munis was just upgraded from AA to AA+ (nice it didn't go the other way).

So in my taxable accounts, my most recent purchases are a mix of Treasuries, CDs and munis with maturites from 4 months (a few 4-5 month CA munis were available with TEYs above 2%) to 3 years or so, but in tax-advantaged I've been sticking mostly with brokered CDs out to three years.

The 5-year 4% CD deal that's ending today was great, but I just didn't have the time or energy to mess around with it (I feel a little guilty for not doing so, having been one of the vocal proponents of exactly this kind of CD deal since late 2010).

Kevin
Thanks for the update!

Happy2BeFree
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Re: Freezing credit reports and opening CDs

Post by Happy2BeFree » Tue Mar 13, 2018 2:24 pm

I just found out that, at least with some credit unions and banks, they can access your credit report even though it's frozen. I applied to Sharonview for its 4% CD, and must have given permission for them to access my report on the application. I just don't understand why I didn't need to unfreeze it, though I'm happy I didn't have to. If this is the case with other institutions, I won't have a problem opening CDs in the future.

Does anyone have any experience like mine?

FinanceGeek
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Re: Freezing credit reports and opening CDs

Post by FinanceGeek » Tue Mar 13, 2018 3:43 pm

annielouise wrote:
Fri Mar 09, 2018 6:27 pm
Eliminates pins. This is crazy dumb. Criminals already have the answers to all the security questions that they ask to verify identify, so without the pin, criminals could easily unfreeze my credit. Makes the whole process useless.
If a criminal can hacks into a credit bureau they have the PIN too...

Biometrics?

diy60
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Re: Freezing credit reports and opening CDs

Post by diy60 » Tue Mar 13, 2018 3:49 pm

Happy2BeFree wrote:
Tue Mar 13, 2018 2:24 pm
I just found out that, at least with some credit unions and banks, they can access your credit report even though it's frozen. I applied to Sharonview for its 4% CD, and must have given permission for them to access my report on the application. I just don't understand why I didn't need to unfreeze it, though I'm happy I didn't have to. If this is the case with other institutions, I won't have a problem opening CDs in the future.

Does anyone have any experience like mine?
I'm curious as well, do you know for certain Sharonview was able access your frozen credit report or did they open the new account anyway? Also, did you go thru the "lock" process or did you actually "freeze" the credit reports?

Happy2BeFree
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Re: Freezing credit reports and opening CDs

Post by Happy2BeFree » Tue Mar 13, 2018 4:37 pm

diy60 wrote:
Tue Mar 13, 2018 3:49 pm
Happy2BeFree wrote:
Tue Mar 13, 2018 2:24 pm
I just found out that, at least with some credit unions and banks, they can access your credit report even though it's frozen. I applied to Sharonview for its 4% CD, and must have given permission for them to access my report on the application. I just don't understand why I didn't need to unfreeze it, though I'm happy I didn't have to. If this is the case with other institutions, I won't have a problem opening CDs in the future.

Does anyone have any experience like mine?
I'm curious as well, do you know for certain Sharonview was able access your frozen credit report or did they open the new account anyway? Also, did you go thru the "lock" process or did you actually "freeze" the credit reports?
Well I wondered whether they just let me in without checking, but I seriously doubt they'd do that. Plus I did get a hard pull notice (which I don't think I'd get if they weren't able to actually pull it), though TransUnion wasn't able to tell me whether SFCU actually got through or not. To be honest, I didn't want to ask SFCU. After my funds are in and I'm locked down, I'll ask and report back if I find anything out. Also, I did freeze all my accounts.

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