My client asked me recently about “credit insurance” to protect against the recent Equifax data breach. My answer was no. But a credit FREEZE is a good idea.
You have probably seen the headlines about 143 million credit records leaked at Equifax and before that 1 billion accounts were exposed at Yahoo and 110 million records compromised at Target. You may have been offered free credit monitoring to watch your files and alert you to unusual activity.
Some experts argue that you should NOT accept the free credit monitoring because it may limit your rights to seek damages in the event that the breach does create harm to you. So what can you do?
Consumer Reports says that a credit freeze is a good idea if you believe that someone has stolen your private information and might try to open new accounts in your name.
What is a Credit Freeze?
A security freeze offers greater protection than the highly advertised credit monitoring and fraud alert. Credit monitoring does not stop a thief from opening a new account in your name. Instead, they alert you of a potential fraud after the fact —if their monitoring claims hold true. That is not good protection against identity theft. You’ll still have to put in the time to get your file corrected.
The same is true for LifeLock, a company that has been repeatedly fined by the government for unfair and deceptive trade practices. LifeLock alerts you after an identity theft has occurred instead of preventing it from happening.
The other option, fraud alert, offers more protection than credit monitoring but does not provide you with full security. A fraud alert can be placed on your account following any fraudulent activity and requires a business to verify your identity before issuing any new credit. A fraud alert, however, expires after 90 days and needs to be continuously renewed. That is not convenient, so avoid this approach.
A security freeze gives you complete control of your credit file and is the absolute best way to protect your credit and identity. Unlike credit monitoring or fraud alerts, a security freeze stops identity theft from happening rather than alerting you to fraud after it has occurred.
How to do it
To set up a security freeze, you must contact each of the credit bureaus individually. This process can be done online or over the phone. You will be asked some questions to confirm your identity, but it only takes a few minutes.
Equifax: 866-349-5195 – Equifax Freeze
Experian: 888-397-3742 – Experian Freeze
TransUnion: 888-909-8872 – TransUnion Freeze
Depending on your state, you may have to pay a small fee to freeze your credit. In Minnesota it’s five dollars. When you decide to lift the freeze, you will need to pay the fee again.
To lift the freeze, you contact the each bureau and provide your special PIN number and you can lift the freeze for a specific period of time. You can do this online or over the phone. It can take a few days for the freeze to come off.
A Freeze Is Not Enough
Remember, it’s wise to review your credit record periodically and watch all your current accounts for any unauthorized activity. Even if you have a freeze in place. You are entitled to one free credit report from each of the credit reporting agencies every year.
If a data breach has you thinking about your own overall financial game plan you might be looking for some advice. If you would like some unbiased advice from a fee-only fiduciary who is a client advocate for financial success, contact my office at rdunn@dunncreekadvisors.com. I am always happy to help.
Dunncreek Advisors does not provide legal or tax advice, nor is this article intended to do so.
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