That was the sound of the proverbial camel’s back breaking in September 2017, after Equifax announced a data breach that exposed the personal information of an astounding 147 million people. A steady drumbeat of data breaches had occurred prior to this time, yet nothing of the magnitude and severity of Equifax’s knockout punch.
If the 2008 financial crisis was when we lost our innocence regarding the financial system’s safeguards, in similar fashion the Equifax breach was when we said goodbye to any default trust that our identities would remain secure. This breach was the last straw for me and countless millions of people. I finally began taking more proactive measures to protect my identity and personal data.
When I began sharing the steps I was taking, and offering to assist others in the same, I was wholly unprepared for the reaction. There was an overwhelming response and acute interest; a raw and exposed nerve had evidently been struck. I spent the better part of two weeks dedicated to helping those around me avoid being the next casualty of a data breach.
Ever since that time, I have woven identity theft prevention into the financial planning process. After all, where does financial planning end and identity theft prevention begin? It is all tied together and, as I see it, these two elements cannot be separated one from another. Following are the preventative measures that I have personally taken, and regularly incorporate into the financial planning process.
Sure, I had read and heard about credit freezes (sometimes referred to as a security freeze), but said warnings flew in one ear and out the other. Yet after the Equifax breach occurred, it seemed I couldn’t implement the freezes for my wife and I fast enough.
A credit freeze essentially slams the door shut on many types of fraud that an identity thief may attempt, such as opening a bank account or credit card in your name. For example, if you were to apply for a new credit card, the credit card company would run a credit background check on you. If your credit was frozen, the credit check could not be completed, and thus you would be denied the credit card unless you temporarily unfroze your credit. In similar fashion, if a fraudster attempted to obtain a credit card in your name (unbeknownst to you), the application process would be halted if your credit was inaccessible.
You can freeze your credit at the three major credit bureaus (Equifax, Experian and TransUnion) as well as at the lesser-known credit bureau Innovis. Once you have completed the freezes, you will sleep better at night.
Although establishing a credit freeze may prevent identity theft in the future, it will not alert you of fraudulent activity that may have occurred in the past. To uncover that, you will need to periodically review your credit report for suspicious activity, such as the opening of a bank account or credit card that you don’t recognize.
I review my credit report using www.annualcreditreport.com, which allows one free credit report per year from each of the three main credit bureaus. Although I have never found any suspicious records on my credit report, I have discovered long-lost and unused credit cards, which prompted me to close the accounts. There is no reason to have unnecessary accounts and data floating around in cyberspace, so go ahead and cancel that JCPenney card you activated 15 years ago in order to save $27.
At this point, I have no formal stance on purchasing a credit monitoring service (such as LifeLock or Identity Guard). These services monitor the internet and dark web for instances of identity theft and will alert the user of potentially suspicious activity. They typically also provide assistance for victims of identity theft, as well as identity theft insurance coverage.
Personally, I choose to use a credit monitoring service. The peace of mind that it gives me is well worth the cost, yet others may come to a different conclusion after performing their due diligence. For me, the most valuable aspect of this service isn’t in the monitoring itself (although I do value that, to be sure). Rather, it is access to a partner with the specialization necessary to assist me in the rare event that my identity is stolen. Identity theft can take years to unravel and may be both financially and emotionally devastating, so I consider using a credit monitoring service to be a form of “sanity insurance.”
It is likely that your financial life plan takes into account risk management, yet have you considered how identity theft prevention fits into your risk management program? If not, think about the three items I’ve raised as a starting point: credit freeze, credit report and credit monitoring.
This commentary originally appeared June 7 on thestreet.com.
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