The recent Equifax data breach, which potentially impacted 143 million U.S. consumers, appears to be one of the largest cyber security incidents to date. More details can be found on Equifax’s dedicated website, and our immediate recommendation is to take the following actions:
- Access your credit reports
- Check your financial accounts
- Freeze your credit file
In this Viewpoint, we will offer some details on these key steps.
How does credit freezing work?
A credit freeze can be used to complement credit monitoring. By initiating a freeze, your credit report will be locked. The benefit is that it prevents new inquiries which are required to open accounts and credit lines. To initiate this process, you can apply online through one of the three nationwide credit bureaus: Experian, TransUnion, and of course, Equifax. The fees vary from state-to-state and generally range from $5-$10. The fee is enacted when you first place the freeze as well as when you thaw the freeze to access your credit. A credit freeze will not hinder current creditors or debt collectors. Nor will it impact your credit score or the ability to pull free credit reports (which we still advocate you do!).
There are some drawbacks to point out. To freeze your credit entirely, you will need to contact each reporting agency individually to place a freeze. Once the credit file is locked, it is inaccessible until you authorize a thaw through a PIN. It is critical to store your PIN in a safe location – if you lose it, you won’t be able to undo the freeze! If you do need to engage in some activity that would require a credit check (e.g., mortgage, car loan), you will need to ask the creditor which bureau they pull credit from to thaw that report. A thaw generally requires a maximum of three days to take effect, so plan accordingly.
What about third-party credit monitoring services?
In addition to a credit freeze, a third-party monitoring service can be used to keep an eye on your personal credit. As a response to this breach, Equifax is offering free credit monitoring services to all individuals. Note that this service is free for only the first year; after that, a fee will apply for ongoing credit monitoring. There are many services out there, and the fees vary with either monthly or annual costs. How it works is this: any time a credit inquiry takes place, you will receive an alert. This provides the opportunity to review that inquiry, and if necessary, determine if it was fraudulent. It’s important to know that it’s on the individual to act on any suspicious activity – the credit monitoring services merely acts as the notification system.
What other methods are available to monitor my credit?
Regardless of using freezing or monitoring, we recommend that you immediately request a free copy of your current credit report. By law, each of these aforementioned credit reporting companies are required to provide a free credit report to individuals every 12 months. Note that you must request this report; it isn’t provided automatically. We recommend requesting a credit report every four months by rotating through these three services. Details can be found on the Annual Credit Report website. Because of the high volume of requests to the site, an alternative is to call 877-322-8228. Be sure to review the credit report in detail – in particular, watch for any new accounts that you did not open.
We also strongly urge individuals to continually monitor bank and brokerage accounts for unusual activity. Implementing two-factor authentication (or multi-factor authentication) further strengthens the security of your information. How it works is this: you combine a password (something you know) with access to a smart device (something you possess). An example is accessing your bank account online and inputting a code sent to your smart phone via text. Once you enter the code on the bank’s website, you have successfully authenticated your identity. Many websites offer two-factor authentication, and we recommend employing that means of identification wherever possible, even if it seems like a minor inconvenience.
Additionally, one of the best methods in securing your accounts online is to implement good password practices, like utilizing strong and unique passwords on each site. However, this can make it difficult to remember those passwords. Many web browsers like Firefox and Safari now prompt users to save usernames and passwords when visiting websites. While this feature may seem convenient, it is not a secure way to save your login information. Instead, consider a password manager system that can securely store passwords for all your online accounts. These systems encrypt your passwords, help you create strong passwords, use auto-fill to simplify logins and allow you to access your credentials from multiple devices. LastPass is a well-known vendor that provides an online vault to securely store passwords.
How to be vigilant in protecting your personal data
Protecting your credit and personal information requires a multi-faceted approach. The scope of the Equifax data breach is unprecedented, so everyone must be attentive to protecting their identity and financial accounts. The combination of a credit freeze and regular self-monitoring is an excellent place to start. As always, the Truepoint team is here to guide you through these decisions. We encourage Truepoint clients to contact their advisor for more details on the right course of action.