Here is what happens if you were to apply for a line of credit while all of your credit files are frozen. Note here that when I say "frozen," I mean the legislative freeze per the Fair Credit Reporting Act (FCRA), and I'm talking about how things work in the United States.
The freeze prevents anyone from accessing your file, including yourself, except if:
- The request contains the appropriate PIN or some equivalent form of validation;
- In some cases, creditors or entities who have been granted previous access or have an existing relationship with you, are permitted to continue accessing the file (e.g., credit monitoring services).
If access is not granted, no hard inquiries can be made on the file. That's what freezing is intended to do: if an ID thief had previously fraudulently opened up a line of credit under your name, freezing your files prevents future inquiries from impacting your score. Any such application is automatically denied and the reason for denial is flagged as "legislative freeze in place per FCRA." The effect is as if you had never submitted an application in the first place.
If you unfreeze your credit file(s) after the creditor's hard inquiry is made, it is too late: the creditor is not allowed to make a second attempt without your permission; therefore, the answer to your second question is no. Once the result of the initial inquiry shows that the file is frozen, the creditor will typically report to the applicant--you--that the file is frozen, your application is on hold, and in order for it to proceed, you need to provide them with a means to access the file. They will inform you which agency's file was requested, so that you know which file to unfreeze. If you take no action in the time frame that the creditor specifies (e.g., 30 days), then the application is automatically closed and you would have to reapply at a future time; but if so, there is still no impact on your report, because again, no hard inquiries can be made.
Freezing your credit files is something one should consider doing if:
- You do not anticipate needing to apply for credit (including credit cards, retail cards, personal or auto loans, mortgages, apartment rentals, starting new utility services, new mobile phone providers)
- You have been a victim of ID theft, suspect you may have been a victim, or have reason to believe you are vulnerable to fraud (e.g., lost your wallet containing your Social Security card and driver's license, which together contain sufficient information to open lines of credit under your name)
- You do not mind the extra inconvenience and expense of freezing your credit files.
In regard to the chain of comments postulating the scenario where you purposefully apply for credit in order to receive a discount: typically, such discounts require the application actually go through. But even if the creditor offers the discount simply for applying, there is probably some fine print involved on the application form, stating to the effect that by signing the form, you attest that you grant permission for the creditor to access your credit file, and that if this access is denied for any reason, the discount would not apply at the point of sale. And if the creditor/retailer didn't do that, well, it's their loss for being stupid: such an offer would have plenty of people with bad credit fill out applications just to get a discount, knowing they would be denied, let alone those with good credit with legislative freezes in place.
As to whether such behavior constitutes fraud, that is a legal question that depends on what is written on the application you sign. Any failure to catch this sort of scenario on the part of the creditor, while not strictly illegal or fraudulent, is at the very least foolish on their part.