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How to protect yourself from financial fraud and from identity theft

identity theft online

Everyone is susceptible to theft of Their financial information. Criminals will target anyone; and, if they are successful in stealing your identity or credit card or Social Security information the results could be financially devastating.

Fortunately, there are several things you can do to protect yourself which I discuss below.

Security freeze

The issuance of credit in the United States is very efficient. It is possible because creditors primarily rely on the three credit reporting companies to make quick decisions as to granting you credit.

These credit reporting companies have a credit report on all of us, and they include:

  1. Equifax
  2. TransUnion
  3. Experian

For better or worse we all have a relationship with these credit reporting companies.

It is a good idea to periodically ask each credit reporting company for a copy of your credit report, and if you find any errors, contact them to make corrections.

Keep in mind that many employers will check your credit report from one or more of the three credit reporting companies in connection with a job application.

No legitimate business would grant you credit without first checking with one or more of these companies and accessing your credit report.

To protect yourself from unauthorized access you can put a security freeze on your credit report. A Security Freeze prevents prospective creditors from accessing your credit file without your permission. You need to go through the security freeze process separately with Equifax, TransUnion, and Experian. Each credit reporting company has a website with instructions on how to create the security freeze. There is no cost for a security freeze.

The Security Freeze federal law became effective on September 21, 1018. Prior to the federal law, every state and the District of Columbia each had their own law, which was all similar but not identical.

Creditors typically won’t offer you credit if they can’t access your credit reporting file;- so a Security Freeze, (also called a Credit Freeze), prevents you or others from opening accounts in your name (but see below regarding how to lift the freeze). A Security Freeze can be useful in preventing an identity thief from opening a new credit account in your name, but make sure you create the Security Freeze with all three credit reporting companies.

However, there are a limited number of entities that can see your credit file while a Security Freeze is in place, including:

  • Creditors of accounts you currently hold
  • Certain government entities like child support agencies
  • Companies that you’ve hired to monitor your credit file

Now you’re protected!

How do I apply for credit after placing the security Freezes?

After you place a Security Freeze, you will need to perform one step for each of your credit reports, and this is generally an easy process. At the time you put the Security Freeze on each your three credit reports, Equifax, TransUnion, and Experian will give you a PIN number. Make sure you put this PIN in a safe place. This PIN number will allow you to request a temporary lift of your Security Freeze so the company you are applying for credit with can view your credit report or reports. The temporary lift needs to be requested individually from Equifax, TransUnion, and Experian depending upon which of these companies the creditor uses for credit checks.

It is suggested that when you request the temporary lift, you set its duration as short as possible because during the temporary lift period your credit report is exposed to anyone with access to credit reports. It seems to be a crack in the law, but we are stuck with it;- at least for now.

Children and a security freeze

After you obtain your Security Freeze, consider applying for a Security Freeze for your Children and others for whom you may be responsible for elderly parents. There have been instances where identity thieves will target children. Children tend to have little need for credit;-So, parents do not monitor their credit reports. When the children are grown and looking for credit, they may find those identity thieves used their Social Security Numbers long ago to ruin their credit, and they now have a mess on their hands. Similarly, If there are elderly people are often susceptible to financial fraud or are unable to handle their financial affairs adequately. Helping them place Security Freezes on their credit files will provide you and them additional peace of mind.

Virtual account numbers – credit cards

Virtual account numbers are available from card issuers including Bank of America, Citi and Capital One. Hopefully, other credit card issuers will offer this in the future.

Virtual Account Numbers offer you a way to safeguard your credit card account when shopping online or over the phone.

Here’s how it works:

  1. You install an app on your computer of phone.
  2. Now you’re ready to shop.
  3. When it comes time to enter your payment information simply fire up the app for the credit card you are using.
  4. The app will offer you some options as to the maximum dollar value of the Virtual Account number and for how long it is valid.
  5. Next select create.
  6.  You will see on your screen what looks like a credit card, but The card number will be different than your actual plastic card.
  7. The expiration date, the value (if you limited it) and three-digit security code will also be displayed.
  8. Just enter this information into the website, or provide it over the phone, and you’re done.

Once the vendor processes your Virtual Account Number, the card becomes worthless to any other vendor. So, if the Virtual Account Number is stolen, it will not be valid for addition purchases

When you get your credit card statement, all you see is the charge as if you used the actual plastic credit card

You can cancel a Virtual Account Number at any time. This can be helpful if you want to cancel a bill that is on automatic payment or renewal.

Credit monitoring

This is a service that many financial institutions will sell you. In my opinion, this is a waste of money. Credit Monitoring services will report to you if they see some unusual activity on your credit report. The problem with this is it is after the fact and may be too late to easily fix. The above steps are all proactive and work to prevent any breach in the first place. But it is up to you if you to evaluate Credit Monitoring to see if it right for you.

Life lock

From the ads, I see on TV and the Life Lock website it seems to be similar to Credit Monitoring, but more comprehensive. They charge different fees depending on the level of service you choose. They do offer, in some instances, reimbursements for loses and help with clearing identify theft related issues. They also provide some detection services related to computer and online scams. Again, It is up to you to evaluate Life Lock to see if it is right for you.

Your Social Security Number cannot be changed and The Dark Web

Except under extreme circumstances we get only one Social Security number for life. This number is used for many purposes (e.g., obtaining credit). Be careful not to give this number to anyone who does not truly need it (this may include doctors).

The Dark Web is a term that refers specifically to a collection of websites that exist on an encrypted network and cannot be found by using traditional search engines or visited by using traditional browsers. Almost all sites on the so-called Dark Web hide their identity using the encryption. I bring this up in connection with your Social Security Numbers because it has been reported that many stolen Social Security Numbers have been offered for sale on the Dark Web and one of them might be yours.

This is why getting a Security Freeze so important and urgent!

Catch you later,

Steve

1 thought on “How to protect yourself from financial fraud and from identity theft”

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