Independent, Fee-Only Financial Advisor

Independent, Fee-Only Financial Advisor

Friday, December 21, 2018

Worried About Identity Theft?

With major data breaches occurring more and more frequently, and as more and more of our personal information moves and is shared online, Identity Theft is a big concern for your financial life. It is important to understand the different risks involved in a data breach/theft of any sort and how you can prepare for them.

The most immediate fear is that someone obtains your financial account information and can withdraw money from your existing accounts or make a copy of a credit card. This would directly affect your financially, as the thief would be directly taking your money. In the wake of the Great Target Data Breach of 2013, there was concern about actual credit or debit card data being replicated and used. This concern more often appears in less high profile cases. A skimmer placed over a legitimate credit card terminal or a situation where you hand your card to someone else to process can take all of the information necessary to run an unauthorized transaction. Large scale breaches generally do not have ll of this information together in a readable format. To prevent being a victim here, keep two things in mind. First, using a credit card provides you with some level of protection as it does not offer direct access to your bank account. Using a credit card is using that company's money, and they have more resources than you to identify and fight fraudulent charges. Secondly, monitor your accounts for suspicious purchases.

In large data breaches the big worry is that there is enough identifying information about you that someone can open a credit account in your name. While this doesn't mean they have access to your money, they are using your name and your good credit history to get money. This affects you later on if this damages your credit and makes it harder or more expensive for you to take out loans or credit cards.

If you are concerned about Identity Theft, here are some steps you can take:
  1. Monitor your existing accounts. This is different from identity theft, but more immediately relevant to your finances. Keep an eye on bank accounts, credit cards and any service that has access to them. Setting up transaction alerts will help you stay on top of this.
  2. Check your credit report. You can get a free credit report once a year from each of three major bureaus: Equifax, Experien and Transunion. Go to to check them either online or receive a paper copy. We recommend spacing them out and getting one every 4 months from a different bureau. Look carefully at this report to make sure that no accounts have been opened in your name.
  3. Monitor your credit. There are a few services that will do this for free: Mint, CreditKarma or your existing credit card company may offer credit monitoring services. This will give you an alert if an account is opened in your name. We recommend some form of credit monitoring, preferably through a company you already do business with (i.e. your credit card company). You need to be aware of how the free services are making money - credit monitoring can involve some your most personal, sensitive information.
  4. Lock your credit or ask for fraud alerts. Each bureau offers a service to “lock” your credit report with them, this is similar to, but a lower standard than freezing. Experian offers Lock and Alert for free. Experian offers CreditLock for an outrageous $25/mo fee (I do not recommend this, even though it has more benefits). Transunion offers a similar Credit Lock for a similarly outrageous $20/mo fee (I do not recommend this either). They all also offer a fraud alert service for free.
  5. Freeze your credit. This will prevent anyone from accessing your credit or even querying your credit for a new account. This is generally free, but the freeing and unfreezing process can be time consuming and I only recommend for someone who will never access credit again (no new credit cards, no new loans, etc).