It works because nearly every institution that would "extend credit" relies on the reports from these agencies to decide to do so. So when they try to pull a r

It works because nearly every institution that would "extend credit" relies on the reports from these agencies to decide to do so. So when they try to pull a report (for you or a fraudster) they get back "sorry, frozen" and that causes them to actually stop and try to actually verify the true identity of the person requesting the loan. If that is you (the proper owner) then you can 'unfreeze' for the purpose of obtaining the loan. If that is a fraudster, they will likely not have your pin's to do the unfreeze, so the bank/business says "no" to the request for money. [edit: spelling]