4 Strategies to Protect Yourself from Identity Theft

Hackers breached Target’s security system and stole credit information from an estimated 110 million customers. Just this past week, upscale retailer, Neiman Marcus reported that their security systems had been breached and customer credit information was also stolen. I predict that these incidents will turn into a trend and become one of the biggest financial news stories of the year. At the epicenter of the story is the current technology used by credit card companies in America. Our credit cards use primarily a ‘swipe’ system to collect data at the cash register. The more technologically advanced systems, used in Europe, use a ‘smart chip’ to encrypt the customer data. You can expect to see our credit card companies migrate to the smart chip technology but the conversion will likely take several years. What can you do to protect yourself in the meantime? Here are 4 steps you can take right now:

  1. Get your free credit report. Federal law allows you to get a free credit report (visit www.annualcreditreport.com) once every twelve months from each of the three credit bureaus: Equifax, TransUnion and Experian. Use these reports to check for accuracy in your file and to make certain no accounts have been opened in your name that you are not aware of.

    Tip: Financial Advisor, Beth Moody, CFP, suggests instead of ordering all three reports at one time, order one every four months. Beth said, “That way you keep an active watch on your credit file… a lot can happen in a year!”

  2. Monitor your credit card and bank account activity. Virtually all credit card companies and most banks have a smart phone app that allows you to quickly review your account activity. Personally, once every day or two, I’ll log in to my accounts and scan the recent activity. It takes me less than ten minutes and if there’s a fraudulent purchase, I’ll catch it quickly.

    Tip: Fraudulent credit card charges are typically easy to handle with little or no losses to you. Debit cards are an entirely different story. If a thief uses your debit card information to purchase something or access your ATM that money is gone from your checking account and won’t be restored until your bank goes through an investigative process. This can take weeks and you’ll be out the money until it’s resolved. If you have and use a debit card, guard it and your information very closely and I recommend monitoring your account activity on a daily basis. If there is a problem, you’ll want to catch it early!

  3. Set up fraud alerts and credit freezes. If someone has stolen your credit information or you suspect you are vulnerable to theft, you can place fraud alert or credit freeze on your account. Fraud alerts are good for ninety days and then are automatically removed unless you re-establish them. This alerts any company seeking your credit file that you may be a victim of fraud and they should take extra precautions to verify that new or additional credit request are valid. A credit freeze is designed to prevent your credit file from being released without your expressed permission. Credit freezes are ‘good until cancelled’ and you have the option to ‘temporarily’ remove the freeze if, for example, you are applying for a loan or additional credit. If you have been a victim of credit fraud, there is generally no charge for these services; otherwise a small charge may apply.
  4. Hire a monitoring service. If you don’t have the time or are not inclined to do this yourself, there are services that will do this for you for a monthly fee of around $20 to $30 per month. You’ll want to stick with well-established companies such as LifeLock, Identify Guard, TrustedID and Identity Force or use the service offered by one of the three credit bureaus mentioned above.

Understand that you need to be vigilant on two primary fronts. Thieves can steal your personal credit card or bank information and use it to make fraudulent credit card purchases or withdraw funds from your bank. The second way thieves can attack is to steal your information and use it to open new accounts in your name. By implementing one or more of the strategies above, you’ll go a long way towards protecting your identity and money.