How to Prevent Identity Theft

After the recent Equifax data breach was announced in September, identity theft has been in the minds of millions of Americans.

But this is not the only or the biggest data breach in recent history.

In the last 10 years, reputable companies, such as eBay and Target, have had their customer data compromised, exposing the personal information of billions of people.

The Equifax incident is only the most recent. It also won’t be the last.

On July 29, 2017, Equifax, one of the biggest credit bureau in the U.S, discovered a breach in their system. The breach is believed to have been going on since mid-May and exposed the personal information of 143 145.5 million consumers, including Social Security numbers, dates of birth, addresses, and driver’s license numbers. Additionally, the credit card data of 209,000 consumers were affected.

With all these breaches, you should be concerned about your information getting into the wrong hands.

Once you’ve trusted a company with your information, its security is out of your hands.

In order to fend off identity theft, you should be careful with whom and how you share your personal information.

Identity theft is so concerning because it gives an unknown individual the power to use your name to commit fraud and destroy your credit.

And it’s much more common than you might think. Between 2006 and 2008, 11.7 millions of people in the U.S. reported identity theft. That’s 5% of the U.S. population. 1 in 20 people.

You need to start protecting your information right now!

How Does Identity Theft Happen?

Identity thieves can get their hands on your information the old-fashion way, by snatching your purse or going through your trash. But many of them resort to more tech-savvy tactics like email “phishing” or spyware.

They pretend to be family members, friends or reputable institutions to trick you into willingly giving them your information. They might even say that you or your family will be in danger if you don’t give it to them. Take a deep breath and take a moment to confirm who you’re talking to before you give them any information.

Also, be very careful before downloading an attachment or clicking a link, even if it’s from someone you know. Their account might have been hacked and the file might be infected with spyware.

Antivirus software and online security have improved in the last 10 years, but so have identity thieves.

Your personal information will never be 100% safe online, but that doesn’t mean you shouldn’t take measures to protect it.

Did the Equifax Breach Affect You?

I’m sure you’re dying to know if the Equifax breach affected you, but at this moment there is no sure way to tell.

Equifax launched a website (equifaxsecurity2017.com) where you can find the newest developments in the case. But the names of the affected customers haven’t been released at this time. Quite honestly, I doubt they even know for sure who was affected.

The company said it will be contacting the affected customers via USPS with additional details once the investigation is over. So keep an eye out for any mail from Equifax.

For the moment, instead of adding more of your information into the system, just assume you have been compromised or that you’ll be in the near future. Even if that’s not the case, it’ll benefit you to take measures to protect your information from now on.

Keep reading to learn how to prevent and how to deal with identity theft if it happens to you.

How to Check Your Credit Report for Identity Theft

If you didn’t know it, you should be keeping a close eye on your credit report.

Credit reports contain information on how you use credit and include personal information, such as your name and previous and current addresses.

Reading and understanding your report can help you spot discrepancies in it. Look for incorrect information and unknown credit lines. Those are major indicators of identity theft.

And thanks to the Fair Credit Reporting Act (FCRA), you have the right to one free credit report from each of the main bureaus (Equifax, Experian, and TransUnion) once every 12 months. You can request your free credit report at annualcreditreport.com.

Avoid “imposter sites” like freecreditreport.com which are actually operated by the main bureaus and could end up charging you money. If you have to enter in credit card information, that’s a good indication that you’ll probably be charged at some point.

Lesser know credit reporting agencies such as Innovis and ChexSystems also provide you with one free report a year, but you need to contact them directly.

Additionally, if you live in one of 7 states (Colorado, Georgia, Maine, Maryland, Massachusetts, New Jersey, or Vermont) you are entitled to an additional free copy a year by state law. But you must contact each credit bureau directly to request it.

You should also keep an eye on your credit score throughout the year. If your score suddenly decreases without any reason, your identity might have been stolen and it would be wise to check your credit report at that time.

Bank of America, Chase, Citibank and Capital One provide you with free credit score monitoring. Check with your bank or credit card company to know if you have access to this resource.

You can also use websites such as Credit Sesame and Credit Karma, which offer free credit report and credit score monitoring. While free is nice, you should know that the scores they provide are not typically used by lenders. If you’d like to know the scores that are used by lenders, you’d need to use a paid service called MyFICO.

How to Prevent Identity Theft

Although your personal information can never be 100% safe, you should make sure to protect your identity to the best of your ability.

In order to make it harder for your identity to be stolen, you should avoid spreading your information as much as possible and keep an eye out for signs of identity theft.

Now let’s learn some actionable steps you can take to minimize the risk!

Use ID Monitoring to Your Advantage

In almost every situation, when a company is hacked and your information is part of the breach, they typically offer you free credit monitoring.

While it’s pertinent that you monitor your credit and keep an eye out for identity theft, by consistently signing up for all the free ID monitoring services offered by companies, you’ll be spreading your information even more.

Isn’t that what you’re trying to avoid?

Here’s something else you need to know. ID monitoring doesn’t stop identity theft, it just alerts you to changes in your credit so you can react quicker.

If you really want to prevent identity theft from occurring, see the upcoming section on freezing your credit.

If you’ve never been part of a security breach where free ID monitoring was offered, there are a few free credit monitoring options available. Just know that they don’t cover all the credit bureaus. For example, Credit Karma only covers TransUnion and Equifax. Credit Sesame only covers TransUnion.

Therefore, if someone opens up an account in your name and the information is only reported to Experian, neither of those two options will alert you to the issue.

In my opinion, paying for ID monitoring may be a better solution since you can keep your information limited to only one company. Personally, I recommend and use myFICO’s Ultimate 3B monitoring. Not only do you get credit monitoring, you also get to see the actual credit scores that the majority of lenders use when you apply for credit.

I know free sounds good, but what’s the value of your identity?

Place a Fraud Alert on Your Credit Report

Fraud alerts can make it more difficult for identity thieves to open up new credit accounts in your name.

A fraud alert requires companies to take additional steps to confirm your identity before offering credit. This is usually a phone call where the bureau will ask information that only you should know regarding your credit file. Therefore, if you decide to place a fraud alert on your credit report, make sure your contact information is up-to-date with the credit bureaus.

You can place a fraud alert on your credit report by calling one of the credit bureaus. They are required by federal law to alert the other two major bureaus., but I would still call the other two to make sure the alert goes through.

The initial 90-day alert is free, after which you can extend it for up to 7 years. The extended fraud alerts are available for true victims of identity theft. If you’re not a victim of identity theft (i.e. you’re just being overly cautious), you can renew the alert every 90 days.

Place a Freeze on Your Credit File

A credit freeze blocks all creditors from accessing your credit report until you remove or temporarily lift it. So no new credit lines can be opened, by you or by other people.

Under a credit freeze only existing creditors, state/local agencies (law enforcement and child support agencies), credit monitoring services, and you can review your credit report.

Due to this high level of protection, it’s what I recommend to all of my clients that are concerned about identity theft. It’s the ultimate level of protection.

Here are the links to the security freeze pages of the three major credit bureaus.

• Equifax
• Experian
• TransUnion

In addition to the three major credit bureaus, you may also freeze the alternative agencies I mentioned earlier, Innovis and ChexSystems.

If you want to open a new credit line, you can lift the freeze for a specific creditor or period of time by contacting the credit bureau. This is commonly referred to as temporarily thawing your credit. Once you’re done, the freeze will resume automatically.

Due to federal law, freezing your credit is free. So, you have no excuse not to do it.

Other Tips to Prevent Identity Theft

Buy a shredder. Destroy personal information from all documents and mail before throwing them out. Many identity thieves are dumpster divers. Personally, I recommend using a micro-cut shredder. They will turn the documents into very fine pieces of paper that would be extremely difficult, if not impossible, to put back together.

Remove as much personal information as possible from your wallet. Take out unnecessary credit cards, debit cards, and other identifying documents. And NEVER carry your Social Security card and/or birth certificate around. Keep those in a fireproof safe. 

Change passwords frequently. Services like LastPass allow you to store all your passwords in one place. You can create unique, secure passwords for each one of your accounts without the fear of forgetting them. You will only need to remember your master password and the passwords are locally stored on your computer, not the cloud.

Safeguard personal information. Don’t give out personal information unless you initiated the contact. Identity thieves use email “phishing” and spyware to get their hands on your information. Also, make sure to activate two-factor authentication whenever possible. It’ll protect your account even if your password is compromised by asking for the answer to a security question or by sending a unique code to your phone.

Safeguard your mail. Take your outgoing mail directly to the post office or a USPS mailbox. I also recommend getting a secure mailbox for incoming mail.

Review your statements for suspicious transactions. I know you probably don’t check your bank statements or balance your checkbook anymore, but in today’s world, it should be a part of your life. Review all of your transactions. If you don’t remember making it, someone else might have your account information. Report it to the fraud department of your bank or credit card company. Don’t trust them to always spot fraudulent activity.

Dealing with Identity Theft

What if your identity has been stolen?

All the preventive tips in the world won’t help you, but you should still protect your information to avoid future thefts.

But before you do that, you need to work fast to minimize the damage and take back your identity. Here’s what you need to do.

Contact your current creditors. Call their fraud department and let them know your identity has been stolen.

Change all your passwords. Get new account numbers and cards and change your PINs and security questions.

Place a fraud alert and credit freeze on your credit report. This will stop new credit lines from being opened in your name. Go back up for more information on how to do this.

Get your credit report.  Look for other issues beyond the initial things you noticed. You want to record all fraudulent activity before filing an Identity Theft Report.

Report identity theft to the Federal Trade Commission (FTC). They collect statistics and provide resources for victims. Their website (identitytheft.gov) will walk you through creating an Identity Theft Report. You will need it to prove that someone stole your identity and to place an extended fraud alert, remove fraudulent information from your credit report, and stop creditors from reporting fraudulent accounts.

File a police report. Don’t expect the police to do anything about it, but you want the paperwork to prove this debt isn’t yours. Many people don’t report identity theft to the police because the culprits are often family members or friends. You might want to protect them, but you also need to act in your own self-interest. It’s your credit history at stake and you’ll end up repaying that debt if you don’t report it.

*     *     *     *     *

In today’s world, your personal information is more vulnerable than ever. Your name, address, phone number, and even Social Security number are scattered across the internet.

You can’t just trust the safety of your information to some website or app. You need to be diligent and prevent identity theft. It’s always better to be safe than sorry.

With your information, identity thieves can:

• Withdraw/transfer money from your accounts
• Open new credit lines under your name
• Use up your health plan benefits
• Add health conditions to your medical records, denying you access to coverage
• File and receive your tax returns
• And even give your name to the police

You need to protect your identity.

Now get out there and take care of your money, so it can take care of you later.

Your financial coach,