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Stop Worrying… Embrace the Security Freeze

The recent cybersecurity attack that hit the credit reporting agency Equifax has been called the worst data breach in the history of the modern era.  While this may be true, it’s likely your data was stolen long before the Equifax fiasco.    

A majority of Americans (64%) had already experienced at least one type of data theft, before the Equifax breach was reported, according to Pew Research Center.  Most are unaware.  

If you ever used Yahoo mail, you were likely part of the Yahoo data breach, announced in 2016, that impacted an estimated 1 billion user accounts.  Or perhaps you had your health insurance with Anthem, who reported in 2015 that as many as 80 million current and former customers had been impacted.

Earlier this year the U.S. Office of Personnel Management announced that data on 4 million government employees was compromised.  A few weeks later, Sally Beauty, a nationwide retailer, announced that they found their customer information available for sale on a Russian website.  It was the same website that offered stolen credit card data in the wake of the massive data breaches at Home Depot and Target.   

Cleaning up after your identity is stolen can be a nightmare.  My suggestion is that you use the recent Equifax disclosure as a wake-up call.  Get out in front of this problem before discovering that someone opened a new credit card or filed for a phony tax refund in your name.    

If your response is to do what each of the breached organizations suggest — to take them up on one or two years’ worth of free credit monitoring services — you might sleep better at night but you will probably not be any more protected against crooks stealing your identity.  Credit monitoring services aren’t really built to prevent ID theft.  The most you can hope for from a credit monitoring service is that they give you a heads up when ID theft does happen, and then help you through the excruciating process of getting the credit bureaus and/or creditors to remove the fraudulent activity and to fix your credit score.

In short, if you have already been victimized by identity theft (fraud involving existing credit or debit cards is not identity theft), it might be worth paying for these credit monitoring and repair services or sign up for any free services offered by the offenders.  If you are not offered free monitoring and would prefer not to pay monthly fees for the rest of your life to LifeLock or a similar service, and don’t mind putting up with a myriad of ads, there is a free alternative.  Go to CreditKarma.com to sign up for a free account and you’ll get access to free credit monitoring. If they notice any suspicious activity, you’ll get an alert.  Plus, Credit Karma also gives you free access to your credit scores and reports, as well as tips on what factors are impacting your credit.

If you want to be more proactive, a monitoring service is simply not enough.  I strongly advise you to consider freezing your credit file at the major credit bureaus. 

There is shockingly little public knowledge or education about the benefits of a security freeze, also known as a “credit freeze.” Also, there is a great deal of misinformation and/or bad information about security freezes available online.  As such, I thought it best to approach this subject in the form of a Q&A, which is the most direct method I know how to impart knowledge about a subject in way that is easy for readers to digest.


Q:  What is a security freeze?

A:  A security freeze essentially blocks any potential creditors from being able to view or “pull” your credit file, unless you affirmatively unfreeze or thaw your file beforehand.  With a freeze in place on your credit file, ID thieves can apply for credit in your name all they want, but they will not succeed in getting new lines of credit in your name because few if any creditors will extend that credit without viewing your credit file first.  And because each credit inquiry caused by a creditor has the potential to lower your credit score, the freeze also helps protect your score, which is what most lenders use to decide whether to grant you credit when you truly do want it and apply for it. 

 

Q:  What’s involved in freezing my credit file?

A:  Freezing your credit involves notifying each of the major credit bureaus that you wish to place a freeze on your credit file.  This can usually be done online, but in certain circumstances you may need to contact one or more credit bureaus by phone or in writing.  Once you complete the application process, each bureau will provide a unique personal identification number (PIN) that you can use to unfreeze or “thaw” your credit file should you need to apply for new credit in the future.  Depending on your state of residence and your circumstances, you may also have to pay a small fee to place a freeze at each bureau.  There are four consumer credit bureaus, including Equifax, Experian, Innovis and Trans Union When you do a credit freeze, it is imperative that you freeze your credit with all three bureaus.

 

Q:  How much is the fee, and how can I know whether I have to pay it?

A:  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 (recommended).  However, in most states, consumers can freeze their credit file for free at each of the major credit bureaus if they also supply a copy of a police report and in some cases an affidavit stating that the filer believes he/she is or is likely to be the victim of identity theft.  In many states, that police report can be filed and obtained online.  The fee covers a freeze as long as the consumer keeps it in place.  Equifax has a decent breakdown of the state laws and freeze fees/requirements.  Also, if you were subject to the recent Equifax breach, Equifax will waive their freeze fee for the first year.

 

Q:  What’s involved in unfreezing my file?

A:  The easiest way to unfreeze your file for the purposes of gaining new credit is to spend a few minutes on the phone with the company from which you hope to gain the line of credit to see which credit bureau they rely upon for credit checks.  It will most likely be one of the major bureaus.  Once you know which bureau the creditor uses, contact that bureau either via phone or online and supply the PIN they gave you when you froze your credit file with them.  The thawing process should not take more than 24 hours.

 

Q:  I’ve heard about something called a fraud alert. What’s the difference between a security freeze and a fraud alert on my credit file?

A:  With a fraud alert on your credit file, lenders or service providers should not grant credit in your name without first contacting you to obtain your approval — by phone or whatever other method you specify when you apply for the fraud alert.  To place a fraud alert, merely contact one of the credit bureaus via phone or online, fill out a short form, and answer a handful of multiple-choice, out-of-wallet questions about your credit history.  Assuming the application goes through, the bureau you filed the alert with must by law share that alert with the other bureaus.  Consumers also can get an extended fraud alert, which remains on your credit report for seven years. Like the free freeze, an extended fraud alert requires a police report or other official record showing that you’ve been the victim of identity theft.

 

Q:  Why would I pay for a security freeze when a fraud alert is free?

A:  Fraud alerts only last for 90 days, although you can renew them as often as you like. More importantly, while lenders and service providers are supposed to seek and obtain your approval before granting credit in your name if you have a fraud alert on your file, they’re not legally required to do this.

 

Q:  If I thaw my credit file after freezing it so that I can apply for new lines of credit, won’t I have to pay to refreeze my file at the credit bureau where I thawed it?

A:  It depends on your state. Some states allow bureaus to charge $5 for a temporary thaw or a lift on a freeze. However, even if you have to do this once or twice a year, the cost of doing so is almost certainly less than paying for a year’s worth of credit monitoring services. The Consumers Union has a handy state-by-state guide listing the freeze and unfreeze fees.

 

Q:  Is there anything I should do in addition to placing a freeze that would help me get the upper hand on ID thieves?

A:  Yes; periodically order a free copy of your credit report. By law, each of the three major credit reporting bureaus must provide a free copy of your credit report each year — via a government-mandated site: annualcreditreport.com. The best way to take advantage of this right is to make a notation in your calendar to request a copy of your report every 120 days, to review the report and to report any inaccuracies or questionable entries when and if you spot them.

 

Q:  I’ve heard that tax refund fraud is a big deal now. Would having a fraud alert or security freeze prevent thieves from filing phony tax refund requests in my name with the states and with the Internal Revenue Service?

A:  Neither would stop thieves from fraudulently requesting a refund in your name.  However, a freeze on your credit file would have prevented thieves from using the IRS’s own Web site to request a copy of your previous year’s tax transcript — a problem the IRS said led to tax fraud on 100,000 Americans this year and that prompted the agency to suspend online access to the information.  If you become the victim of identity theft outside of the tax system or believe you may be at risk due to a lost/stolen purse or wallet, questionable credit card activity or credit report, etc., the IRS recommends that you contact their Identity Protection Specialized Unit, toll-free at 1-800-908-4490 so that the IRS can take steps to further secure your account.

The IRS issues taxpayer-specific PINs for people that have had issues with identity theft.  If approved, the PIN is required on any tax return filed for that consumer before a return can be accepted. To start the process of applying for a tax return PIN from the IRS, check out the steps at this link.  You will almost certainly need to file an IRS form 14039 (PDF), and provide scanned or photocopied records, such a driver’s license or passport.  Understand, however, that the IRS does not approve all PIN requests, and the approval process seems to be quite delayed and haphazard at best.

 

Q:  Okay, I’ve got a security freeze on my file, what else should I do?

A:  It’s also a good idea to notify a company called ChexSystems to keep an eye out for fraud committed in your name. Thousands of banks rely on ChexSystems to verify customers that are requesting new checking and savings accounts, and ChexSystems lets consumers place a security alert on their credit data to make it more difficult for ID thieves to fraudulently obtain checking and savings accounts.  For more information on doing that with ChexSystems, see this link

 

Q: If I freeze my file, won’t I have trouble getting new credit going forward? 

A: If you’re in the habit of applying for a new credit card each time you see a 10 percent discount for shopping in a department store, a security freeze may cure you of that impulse. Other than that, as long as you already have existing lines of credit (credit cards, loans, etc) the credit bureaus should be able to continue to monitor and evaluate your creditworthiness should you decide at some point to take out a new loan or apply for a new line of credit.

 

Q:  How do I get started?

A:  Here are detailed instructions on how to freeze and thaw your credit with each agency:

EQUIFAX CREDIT FREEZE

  • Credit freezes may be done online or by certified mail – return receipt requested.
  • Check your state’s listing for the exact cost of your credit freeze and to see if there is a reduction in cost if you are a senior citizen.
  • Request your credit freeze by certified mail using this sample letter. Please note the attachments you must include.
  • If your PIN is late arriving, call 1-888-298-0045. They will ask you for some ID and arrange for your PIN to be sent to you in 4-7 days.
  • Unfreeze: Do a temporary thaw of your Equifax credit freeze by snail mail, online or by calling 1-800-685-1111 (N.Y. residents dial 1-800-349-9960).
  • Info on freezing a child’s credit with Equifax can be found here.
  • If requesting a freeze by mail, use the following address:
      • Equifax Security Freeze
        P.O. Box 105788
        Atlanta, GA. 30348

EXPERIAN CREDIT FREEZE

  • Credit freezes may be done online; by certified mail – return receipt requested; or by calling 1-888-EXPERIAN (1-888-397-3742). When calling, press 2 then follow prompts for security freeze.
  • Check your state’s listing for the exact cost of your credit freeze and to see if there is a reduction in cost if you are a senior citizen.
  • Request your credit freeze by certified mail using this sample letter. Please note the attachments you must include.
  • You can also freeze a child’s credit report. The information contained at this link is applicable for all three credit bureaus. You must first write a letter to each bureau to learn if your minor child has a credit report and if so, then you can proceed to freeze it.
  • Unfreeze: Do a temporary thaw of your Experian credit freeze online or by calling 1-888-397-3742.
  • Info on freezing a child’s credit with Experian can be found here.
  • If requesting a freeze by mail, use the following address:
    • Experian
      P.O. Box 9554
      Allen, TX. 75013

TRANSUNION CREDIT FREEZE

  • Credit freezes may be done online, by phone (1-888-909-8872) or by certified mail – return receipt requested.
  • Check your state’s listing for the exact cost of your credit freeze and to see if there is a reduction in cost if you are a senior citizen.
  • Request your credit freeze by certified mail using this sample letter. Please note the attachments you must include.
  • Unfreeze: Do a temporary thaw of your TransUnion credit freeze online or by calling 1-888-909-8872.
  • Info on freezing a child’s credit with TransUnion can be found here.
  • If requesting a freeze by mail, use the following address:
    • TransUnion LLC
      P.O. Box 2000
      Chester, PA 19016

 

Q:  Anything else?

A:  Beware of related phishing & other scams.  Criminals will use every tactic they’ve got to take advantage of this situation.  With so many Americans worried about whether their information was exposed and if they are at risk, crooks are going to tap into that fear in order to trick you into handing over your personal information.

If your information was not exposed, you still may receive a fake email, text or phone call from a criminal offering to help or asking for your information to either determine whether you were affected by the Equifax hack or to help you protect yourself.

But even if you fall for one of these scams, with a credit freeze in place, the criminals won’t be able to carry out fraud in your name.

With scams related to the hack expected to pop up everywhere, here are some tips to help you protect yourself, your money and your identity:

  • ID thieves like to intercept offers of new credit and insurance sent via postal mail, so it’s a good idea to opt out of pre-approved credit offers. If you decide that you don’t want to receive prescreened offers of credit and insurance, you have two choices: You can opt out of receiving them for five years or opt out of receiving them permanently.  To opt out for five years: Call toll-free 1-888-5-OPT-OUT (1-888-567-8688) or visit www.optoutprescreen.com. The phone number and website are operated by the major consumer reporting companies.To opt out permanently: You can begin the permanent Opt-Out process online at www.optoutprescreen.com. To complete your request, you must return the signed Permanent Opt-Out Election form, which will be provided after you initiate your online request. 
  • Be wary of unexpected emails containing links or attachments: If you receive an unexpected email claiming to be from your bank or other company that has your personal information, don’t click on any of the links or attachments. It could be a scam. Instead, log in to your account separately to check for any new notices.
  • Call the company directly: If you aren’t sure whether an email notice is legit, call the company directly about the information sent via email to find out if it is real and/or if there is any urgent information you should know about.
  • If you do end up on a website that asks for your personal information, make sure it is a secure website, which will have “https” at the beginning (“s” indicates secure).
  • Look out for grammar and spelling errors: Scam emails often contain typos and other errors — which is a big red flag that it probably didn’t come from a legitimate source.
  • Never respond to a text message from a number you don’t recognize: This could also make any information stored in your phone vulnerable to hackers. Do some research to find out who and where the text came from.
  • Don’t call back unknown numbers: If you get a missed call on your cell phone from a number you don’t recognize, don’t call it back. Here’s what you need to know about this phone scam.

If your questions weren’t answered here or you need additional guidance, give me a call or send an email.  I want to help.


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Comprehensive Money Management Services LLC (“CMMS”) is a Registered Investment Adviser located in Coral Gables, Florida. The firm is registered with the State of Florida Office of Financial Regulation. CMMS and its representatives are in compliance with the current filing requirements imposed upon Florida-registered investment advisers and by those states in which CMMS maintains clients.

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