digital lock When you hear the words “data breach,” a natural – and understandable – response is to be nervous about the impact to your finances. Having your personal information compromised can lead to negative impacts on your credit, which can impact you when you apply for a loan or purchase a home. The good news is there are steps you can take to minimize the risk, and help stay ahead of fraudsters. Here are some helpful tips on ways you can better secure and monitor your credit.

Credit Freeze:

You may be familiar with the “big 3”, but did you know there are FOUR credit bureaus?  They are Equifax, Experian, Innovis and Trans Union.

A security freeze will prevent anyone from accessing your credit report. So, if a scammer tries to open a new line of credit using your name, date of birth, and social security number, when the lender tries to pull your credit report, it will say the report is blocked and that you need to contact the credit bureau. Note: it will NOT say the report is frozen; this is part of the security feature.

Each of these reporting agencies will give you a number (PIN) or pass word that you would use to unfreeze or thaw your reports.  You should “hide” this PIN or pass word somewhere you won’t lose it – because if you do, you may be stuck frozen.

If YOU attempt to open an account, you’ll have to contact the credit bureau ahead of time (either on the phone or online) and “thaw” your account for a little while. You can set the “thaw” either for a period or for an individual creditor. Also, if you want to completely remove it, you can, if you determine you don’t want the protection any longer. You will need the PIN you set for the bureaus to thaw or unfreeze your reports.  You can also temporarily thaw your account.  For example, if you know you’re going to be looking to purchase a car over the next week, call the three bureaus and thaw your report for the next week. Or, if you are applying for a credit card, call and unfreeze your report for that company only, and then turn the freeze back on.

Depending on your state of residence and your circumstances, there may be a small fee to place a freeze at each bureau. The fee ranges from $0 to $15 per bureau, meaning that it can cost upwards of $60 to place a freeze at all four credit bureaus (which is recommended).  In Massachusetts, it costs $5.00 at each bureau.  That’s $20 to freeze all your credit.  It’s also $5.00 per bureau to thaw your credit.  You can thaw at one bureau or all 4 – check with your lender to see which reporting agency they use.

While using credit freezes may add a few extra steps to protecting your information, it’s better than the alternative – cleaning up your credit after your identity has been stolen.  In this case, prevention is better than cure.

Fraud Alert:

A less-impactful alternative to a credit freeze is a fraud alert.  A fraud alert requires potential creditors to contact you and obtain your permission before opening new lines of credit in your name. You are allowed by law to file a fraud alert (also called a “security alert”) with one of the credit bureaus (Equifax, Experian or Trans Union) every 90 days (these are links to their credit freeze websites, safe to click and share).  Whichever one you file with is required by law to alert the other two bureaus as well. The fourth bureau, Innovis, follows the same rules as the big three, and you may file a fraud alert with them as well.

Fraud alerts last 90 days, and you can renew them as often as you like (a recurring calendar entry can help with this task); consumers who can demonstrate that they are victims or are likely to be victims of identity theft can also apply for a long-term fraud alert that lasts up to 7 years (a police report and other documentation may be required).

Free Credit Reports:

You are entitled by law to a free credit report from each of the “big 3” once a year.  This means you can check your credit 3 times a year (once every 4 months with each of the bureaus).  The only site you need to obtain this free copy is annualcreditreport.com, or by phone at 877-322-8228. Everywhere else will try to sell you a report, or offer a “free” report if you agree to sign up for subscription service — usually credit monitoring.  There are lots of look-alike sites out there (like freecreditreport.com) that are not the real, government-mandated service, so watch out.  It’s important to validate the services you use, especially when it comes to your finances.

Your free credit report will show all your lines of credit and other debt obligations, along with lots of data.  However, it won’t show your FICO score.  If that’s what you’re looking for, go to your bank or credit card company.  It usually costs money to get your FICO score.

Internet banking is your friend here. Monitoring your accounts and credit report for unauthorized transactions is critically important.

  • When the bank and customer work together, we can better prevent fraud.
  • Banks use a combination of safeguards to protect your information, such as employee training, strict privacy policies, rigorous security standards and encryption systems.
  • Unfamiliar accounts or activity could indicate identity theft.
  • If you suspect you are a victim of fraud, you should alert your bank right away.

Summary:

So, to sum it up, these are your options to prevent identity theft causing you to have to clean up your credit:

  • Credit freeze (most effective, but requires the most steps)
  • Fraud alert (less effective, but requires less steps)
  • Free credit reports (doesn’t prevent identity theft but can give you insight, can be done in conjunction with a freeze or alert)
  • Monitor you existing credit card and bank accounts for transactions you don’t recognize