Key Takeaways
There’s no need to panic if a company informs you by mail that they suffered a data breach. But there are steps you can take for greater peace of mind.
Unless you’re applying for a loan soon, consider freezing your credit. That way, no one can misappropriate your credit history or personal identity, or take out a loan in your name.
Freezing your credit is quick, efficient and generally free. And doing so won’t impact your credit score.
Freezing credit is now easier and can be done online through the three main credit bureaus (Experian, Equifax, and TransUnion) at no cost, with the ability to quickly unfreeze when needed. Freezing credit is often more effective and doesn't negatively impact credit scores.
If you’re like many of our clients, you’ve received letters from large companies notifying you that they’ve suffered a data breach. These letters usually inform you that your personal data may have been compromised as part of the breach and they are offering one or two years of “free” credit monitoring to protect yourself. I’ve personally received three such letters this year alone. If you decide to take the company up on the offer, just make sure you read the fine print, because some of the credit monitoring services they partner with, while legit, will keep auto-renewing (and charging you) after the promotional period ends.
Instead of relying on these offers, I’ve found it more helpful to “freeze” your credit if you’re not planning to apply for a loan, mortgage or lease in the near future. It’s so much easier to freeze and unfreeze your credit than it used to be – and of course, we’re happy to assist you with the process.
How To Freeze Your Credit
To freeze your credit, all you need to do is create an account on the websites of the three main credit bureaus -- Experian, Equifax and TransUnion. After logging in, simply click on the “freeze” button, and you’re done. Now if a cybercriminal or anyone else tries to take out a loan or credit card in your name, it won’t be approved because the bureaus won’t release your credit history. If down the road you want to apply for a new credit card or auto lease, etc., just go to each credit bureau website, log in, click on “unfreeze” and within minutes your credit history is unfrozen. Again, this process is so much easier than before. You can even elect to use the “thaw” option in which your credit is automatically refrozen within 24 hours of unfreezing it to apply for a loan. That way you don’t even have to think about refreezing your credit manually and you remain protected.
Taking this approach is certainly much less of a headache than having your identity stolen or dealing with multiple companies that are monitoring your credit.
The Bottom Line
Many of you are financially well-established. You have already have credit cards you have grown comfortable with and tend to pay cash for large purchases, especially during periods of high interest rates. Your default state should be to have your credit history frozen and you should only unfreeze it when you are applying for a loan or other instances in which you may have to share your credit history temporarily with a bank or other legitimate party.
Clients sometimes ask me if freezing and unfreezing your credit history will negatively impact their credit score. No, it won’t. If anything, it prevents someone from running your credit, which is what can impact your credit score to a degree. By the way, the new Novi website has a section called “Credit Freeze” under the menu “Insights” where you can find links to these websites to freeze your credit. Best of all, doing so is free of charge.
The Role Of Credit Monitoring Services
While many of the credit monitoring services are legitimate, not all of them fix the problem if your identity has been compromised. They offer real-time alerts about any unusual activity, which can be incredibly helpful if you need to take quick action, but again, it’s up to you to remedy the situation. That is why we still recommend freezing your credit unless you plan to use it in the near future.
If you’re curious about your credit score, you can sign up for services like Credit Karma that allow you to check your credit score daily, however Credit Karma does not include Experian. Another service called annualcreditreport.com allows you to obtain a copy of your full credit report once a year, and the best part is it’s free. Using one of these services will not hurt your credit score.
Conclusion
Unfortunately, data breaches are becoming increasingly common. If you receive a letter informing you of a data breach, there’s no need to panic. It doesn’t necessarily mean your identity has been stolen; it only means the company’s customer database has been hacked and cyber criminals could potentially stumble across your personal data and try to use it or sell it. Why take chances? If you or someone close would like more information about protecting your credit history or personal identity, reach out any time. I’m happy to assist.
Freeze credit for protection
DAN SATZ MS, CFP® is a Partner at Novi Wealth
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