A credit freeze isn't a
cure all.
Arnd
Wiegmann/Reuters
Wednesday is the last day to request a free credit
freeze from Equifax.
A credit freeze protects against new accounts being
opened in your name, which happens to 4% of identity-theft
victims.
However, freezing your credit will not prevent the most
common type of identity theft: misuse of current
accounts.
After the Equifax breach, identity-theft horror stories have been
easy to come by.
One solution, according to many experts, is freezing your
credit — something hardly
anyone has done.
Equifax offered consumers the option to freeze their credit for
free in the wake of the massive hack, but that benefit will soon
expire. Wednesday is the last day to
request a free credit freeze from Equifax.
Freezing your credit protects against new accounts being opened
in your name — one of the rarest types of identity theft out
there, affecting only 4% of victims, according to the most recent
Bureau of Justice
Statistics data.
It's not because criminals haven't had access to Social Security numbers
before.
A 2015 data breach at the
health-insurance company Anthem exposed the personal
information, including Social Security numbers, of 80 million
people. A class-action lawsuit was settled this summer, awarding up to $50 to
each person who was affected. Last year, 4.2 billion personal
records were stolen. If someone wants your data, it's
probably
already out there.
The vast majority of identity theft victims — 86% in 2014 — have
problems with a current account, such as a credit card of bank
account, according to BJS data. Freezing your
credit won't prevent that type of crime.
News coverage of the Equifax data breach made it seem as though
half of Americans' financial future was over. Though there's a
risk of identity theft for those affected, it's not a guarantee.
And if it happens to you, your chances of buying a home or
opening another credit card are not ruined forever.
"The good news is you know all of your own history, and this
breach is so well-known and far-reaching that if you are a
victim, it should be easier than usual to fight," Mark
Nunnikhoven, the head of cloud research for the cybersecurity
firm Trend Micro, told CNN.
Resolving credit issues is a headache — but not impossible
Even when missteps on your credit report are your own doing,
resolving them can be easier than you think.
As a financial planner in
New York City, I've helped multiple clients improve their
credit scores, including one client whose score increased to the
mid-700s from the low 500s in three months. It's not because I
have the magic touch — it's just a matter of making calls and
submitting documents until the issues are resolved. In some cases
it takes longer, but even bankruptcy falls off your credit report
eventually.
Victims of identity theft — who are more likely to be
white and have annual incomes of over $75,000 — spent an
average of seven hours resolving problems associated with the
crime, according to the BJS. Since banks and credit-card
companies typically reimburse people for unauthorized account
use, only 14% of victims lost money. Among those who did, the
median amount was $100.
Still, identity theft is a crime. Companies should have better
cybersecurity in place, but even when large systems fail, there
are ways you can protect your identity. The BJS found that 85% of
Americans had already taken steps to prevent identity theft,
including changing passwords and shredding documents with
personal information.
Rather than stressing out over the
Equifax breach, here's what you can do now to prevent
headaches if your identity is stolen now or in the future.
Protect your credit and identity after the Equifax breach:
- Monitor your current accounts daily or weekly.
Use an account-aggregation app like Mint or log into your
various accounts to make sure all charges were made by you. If
you see something suspicious, contact your bank immediately.
- File your taxes early. The IRS is cracking down on tax
fraud, but there could be an uptick after the Equifax
breach. Get your tax information organized early, and submit
your return as soon as you receive your W-2 and 1099 forms.
Added benefit: If you're due a refund, you'll get it sooner,
and if you owe taxes, the amount isn't due until April 15
regardless of when you submit your return.
- Use secure passwords and two-step
verification. Because most identity theft occurs with
existing accounts, one of the best things you can do is
safeguard your data online, especially for accounts that
contain identifying information and credit-card or other
financial data.
- Set up alerts for new credit activity. Save
yourself money and use a free credit-monitoring service, like
Credit Karma or Credit Sesame. You can also set up a
fraud alert or credit
freeze if you'd like.
- Check your credit reports regularly. You can
access one free copy of your credit report from each of the
three bureaus once a year through the government-sponsored
AnnualCreditReport.com. Set a
calendar alert to remind yourself to do this every year, or
pull one report every four months to be extra vigilant. While
you're at it, there may be things you can do to improve your credit
score, fix any errors on
your credit report, and optimize your
collection of credit cards.
- Choose identity-verification questions and answers
carefully. Additional identity-verification questions
can help keep accounts secure, but not if you choose questions
like "What street did you live on when you were growing up?" or
"Where were you born?" that could easily be answered with
access to your social-media account or other personal
information.
If you have been a victim of identity theft, the Federal
Trade Commission has a step-by-step recovery
guide.
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