- Lavina Nagar, CFP®
In the wake of Equifax breach…Making sense of confusing terminologies
It happened at Yahoo, it happened at Target, but this time it is different.
If we go by numbers, data breach at Equifax is not the biggest breach in history. Yahoo still gets the credit for that. However, this breach is significant not because of its magnitude but because of the sensitive information at risk. As a credit reporting firm, Equifax has information on social security numbers, addresses and driver's licenses. Adding to the worries on magnitude of the potential risks, are all the confusing terms like credit freeze, security freeze, fraud alerts, fraud monitoring. Understanding these terms might help in taking the first step in the right direction.
A credit freeze, also known as a security freeze, lets you restrict access to your credit report, which makes it more difficult for someone to open new accounts in your name. This is because most creditors need to see your credit report before they approve a new account. If they cannot access your file, they may not extend the credit.
Flip side of a credit freeze is when you are applying for a loan, or a new service that requires a credit check. If you have a credit freeze on your account, your lender or service provider will not have access to your credit report. You can temporarily remove a freeze to enable you to continue with the loan/service. However, there is a fee for both credit freeze and unfreeze, which varies by the state. An exception to the fee is if you are a victim of an identity theft and can submit a valid investigation or incident report/complaint filed with a law enforcement agency or DMV.
Federal Trade Commission has an easy to read and understand FAQ on its site.
A freeze doesn’t affect your credit score. Also, you can still get your free annual credit report with a freeze, so monitoring your credit is not an issue either.
Please note, while a freeze can prevent new lines of credit, it doesn’t do anything to protect thieves from charging an existing line of credit.
A fraud alert is a mechanism to flag your credit report for future creditors. It alerts/warns future lenders that you may have been a fraud victim, and asks them to take extra precautions before granting a line of credit in your name.
There are three levels of fraud alerts and you can find more information on them from the FTC FAQ.
Good news about fraud alerts is that when you add a fraud alert with any one of the three major credit bureaus, the bureau contacted will automatically notify the other two bureaus.
Credit monitoring is a service that alerts you whenever a change is made to one of your credit reports. There are many credit monitoring companies offering this and related services. Mostly these services are offered on a subscription basis, typically granting regular access to one's credit history, alerts of critical changes to one's credit history, and other additional services. Credit monitoring can help detect credit related fraud and identity theft.
How to Freeze Your Reports
The process for freezing your report is pretty easy. Unfortunately, as mentioned above, you may have to pay a fee to freeze your report with each bureau. Here is the contact information if you want to sign up for a freeze at each of the three major credit bureaus:
Equifax: https://www.freeze.equifax.com (1-800-349-9960)
Experian: https://www.experian.com/freeze/center.html (1-888-397-3742)
TransUnion: https://www.transunion.com/credit-freeze/place-credit-freeze2 (1-888-909-8872)
Innovis: https://www.innovis.com/personal/securityFreeze (1-800-540-2505)
How to Place a Fraud Alert
There is no fee to place a fraud alert. Also, you need to place the alert with only one bureau and the others would be notified as part of the process.
Other Steps to Take
If you have been part of the data breach, the breached company should notify you directly. Keep information they provide and follow up on the steps and suggestions they suggest.
Pay attention to calls or mails that you are not expecting. Contact the sender directly and immediately if you receive unexpected communication.
Monitor your credit reports. You have the right to a free credit report from all the three credit bureaus once a year. You can order online from annualcreditreport.com (the only authorized website for free credit reports), or call 1-877-322-8228.You do not have to look up all three credit reports at the same time - check a different one every four months to spread the monitoring over a year.
Monitor your financial accounts. Visit all your online bank and financial accounts, and if you have not already done so, set up any alert features they may have. Regularly monitor account activities on an ongoing basis for any suspicious activity.
Set up for Two-Factor Authentication for all apps and web-sites that have sensitive data, financial accounts, and e-mail accounts.
Secure your phone, laptop, computers with high quality passwords