Q&A: How to protect your financial data in the wake of the Equifax breach

Dear Liz: Do I have the right to notify the credit bureaus that I do not want any of my financial information stored in their files? They don’t seem to be that secure. I rarely borrow money and the three financial institutions I deal with have all the data they need to lend me money if I need some. I do finance a car on occasion, because if they want to lend me money at less than 1%, why not?

Answer: The short answer is no, you have no right to stop credit bureaus from collecting information about you. You also can’t prevent them from selling that information or keeping it in inadequately secured databases.

One thing you can do is to freeze your credit reports at all three bureaus to prevent criminals from using purloined information to open credit accounts in your name. But that will cost you.

The only bureau currently waiving the typical $3 to $10 fee for freezing credit reports is Equifax, the credit bureau whose cybersecurity incident exposed Social Security numbers, dates of birth and other sensitive identifying information for 143 million Americans. The other bureaus, Experian and TransUnion, are still charging those fees.

You’ll have to pay an additional $2 to $10 each time you want to lift those freezes, which you’ll probably need to do if you apply for new insurance, apartments, cellphone service, utilities and, of course, credit. Financial institutions may indeed have plenty of information about you, but probably wouldn’t lend you any money without access to your credit reports or scores. Freezes also are a bit of a hassle because you need to keep track of a personal identification number, or PIN, to lift the freeze.

Just in case you weren’t irritated enough by this state of affairs, understand that freezes won’t stop other types of identity theft, such as someone getting medical care in your name or giving the police your information when they’re arrested. Still, instituting freezes is probably the best response to the most devastating breach yet.

Thursday’s need-to-know money news

Credit report with score on a desk

Today’s top story: How ‘Pay for Delete’ might help your credit – if you’re lucky. Also in the news: 19 less-obvious wedding costs to bake into your budget, why financial advice is still important regardless of your income, and how to make sure you’re not going to an Equifax phishing site.

‘Pay for Delete’ Might Help Your Credit — If You’re Lucky
Negotiating with a creditor.

19 Less-Obvious Wedding Costs to Bake Into Your Budget
Budgeting the entire package.

Not Made of Money? Financial Advice Is Still for You
You don’t need to be to rich.

Make Sure You’re Not Going to an Equifax Phishing Site
Don’t make matters worse.

Thursday’s need-to-know money news

Today’s top story: Equifax messed up – who pays? You do. Also in the news: 5 foolproof ways to build wealth without a lottery ticket, 3 ways to score after iPhone 8 and iPhone X release, and your ‘money personality’ is first step to financial freedom.

Equifax Messed Up — Who Pays? You Do

5 Foolproof Ways to Build Wealth — No Lotto Ticket Needed

3 Ways to Score After iPhone 8, iPhone X Release

Your ‘money personality’ is first step to financial health

Wednesday’s need-to-know money news

Today’s top story: How a public adjuster can help with hurricane insurance claims. Also in the news: How to choose a student credit card, how millennials got a 6-figure start on retirement saving, and Equifax is waiving their credit-freeze fees.

How to Choose a Student Credit Card
Finding the right card for you.

How a Public Adjuster Can Help With Hurricane Insurance Claims
You don’t have to go it alone.

How Millennials Got a 6-Figure Start on Retirement Saving
Already ahead of the game.

Equifax Is Waiving Their Credit-Freeze Fees for 30 Days
How kind.

Tuesday’s need-to-know money news

Today’s top story: How 3 people conquered credit trouble and bought homes. Also in the news: Top 10 apps for buying the right car at the right time, biting on Whole Foods new prices, and 6 Equifax hack rumors fact-checked.

How 3 People Conquered Credit Trouble and Bought Homes
How to come back from credit trouble.

Top 10 Apps for Buying the Right Car at the Right Price
Get the car you want at the price you want.

Should You Bite On Whole Foods’ New Prices? Maybe Not
Are you really saving?

6 Equifax hack rumors fact-checked
Fact from fiction.

Outrage after outrage

Yesterday Equifax broke the news hackers gained access to the Social Security numbers and other sensitive personal information for 143 million Americans (a group that apparently includes me, my husband, our daughter and probably you).

Because that wasn’t enough, today the outrages just continued:

  • The breach was discovered at the end of July. What was Equifax doing in the meantime? Well, its executives sold about $2 million worth of company shares,  The Washington Post reports.
  • The same day the breach was announced, Congress scheduled a hearing on a bill to shield the bureaus from full accountability from their actions.
  • Equifax offered free credit monitoring for a year, but didn’t make clear whether its usual binding arbitration language applied. So were people waiving their right to sue over the breach? Equifax wouldn’t say, until the New York Attorney General demanded and got an answer: the binding arbitration clause applies to the monitoring product, not the breach. Just in case, after signing up I sent this letter using Equifax’s opt out clause to (hopefully) preserve our right to sue.
  • Credit monitoring doesn’t prevent anything; it just notifies you after you’ve been victimized. Equifax is also offering free credit freezes, which prevent others from opening accounts in your name. Well, it was supposed to be free; some journalists reported they were charged $3.
  • Experian and TransUnion aren’t offering free anything. To shut down your credit, you need freezes at all three bureaus. The others are charging $3 to $10 each, plus additional fees if you need to temporarily lift the freeze to apply for credit, a job, insurance, cell phone service, utilities, an apartment, etc. Oh, and freezes won’t help with other types of crime, such as medical and criminal ID theft or blackmail. (The hack is a potential national security threat, according to experts quoted by the New York Times.)
  • Oh, and when victims try to enroll in credit monitoring, Equifax tells them to come back in a few days. Because, apparently, they’re kind of busy.
  • In fact, all three bureaus’ Web sites were having trouble under the deluge of requests. Sites were freezing and offering error messages; people were getting busy signals or being kicked off calls.

There was no way to make this breach better, but clearly there were plenty of ways to make it worse.

 

Bureaus fined for credit score confusion

51w4H0Y7W7L._SX333_BO1,204,203,200_The Consumer Financial Protection Bureau today ordered Equifax and TransUnion to pay more than $23 million in restitution and fines for deceiving consumers about the usefulness and actual cost of credit scores they sold to consumers. Regulators said the bureaus also lured customers into expensive subscriptions when people thought they were getting free scores.

The CFPB said the bureaus were selling scores without making it clear that they weren’t the FICO scores lenders typically use in their decisions. TransUnion was selling VantageScores and Equifax sold a proprietary score. (Important to note here that VantageScores are now offered for free by many sites, including my employer NerdWallet.)

Credit scoring can be complex, and people are easily confused about the different types of scores and how they’re used by lenders. For example, many people think they have one credit score, when in fact we have many, and those scores change all the time.

People often don’t understand that the scores they’re seeing aren’t necessarily the ones used by lenders. Most lenders use some version of the FICO credit scoring formula, but FICOs come in many different versions and iterations. There are different generations of FICO scores and formulas tweaked for different industries, such as credit cards or auto loans. Furthermore, the FICOs you get from one major credit bureau will differ from the FICOs you can get from the two other bureaus.
Before VantageScore, the bureaus often sold proprietary scores that were used by few, if any, lenders. That led consumer advocates to label these proprietary scores as “FAKO” scores. VantageScores definitely aren’t FAKOs, since they’re used by 20 of the 25 largest financial institutions. But they may be used behind the scenes–for marketing or testing, rather than for deciding whether you get a loan or the interest rate you’ll get.
A VantageScores can give you a general idea of how lenders might view you as a credit risk. If you’re in the market for a major loan such as a mortgage or auto loan, however, you should consider buying the appropriate FICOs from MyFICO.com to get the clearest idea of where you stand.

Big changes afoot for credit bureaus and your scores

check-credit-report-easilyCredit bureaus will have to hold off on reporting delinquent medical bills and supply actual human beings to review disputes under an agreement announced today with New York’s attorney general.

The Wall Street Journal reported that the agreement, to be announced later today, will change how credit bureaus operate nationally. Bureaus will have to wait 180 days before reporting any medical debt on people’s credit reports. When an insurance company pays a medical bill, all references to it will have to be deleted from the individual’s reports.

This is a big deal, since the Consumer Financial Protection Bureau estimates about 43 million Americans medical collection accounts on their credit reports. One such collection can devastate an otherwise pristine credit report and cause credit scores to plunge.

Having human beings review disputes is another significant change. Currently, humans stick a code on disputes before they’re sent to lenders, but the process is highly automated. Errors that have been removed from a report can crop up again (and again and again) when the lenders upload their data files to the bureaus. Getting problems fixed can be a frustrating process when you can’t get a human being to intervene.

The changes won’t happen overnight. The bureaus have three and a half years to roll them out.

Experian to offer FICOs to consumers again

YCS4 coverExperian stopped offering FICO scores to consumers a few years ago, even though it continued to sell the scores to lenders. This refusal made it tough for consumers to know what rates they should expect from mortgage lenders, which typically take the middle of your three FICO scores (one from each bureau). You could still get your TransUnion and Equifax FICOs from MyFico.com, but not your Experian FICO.

That’s apparently about to change. Buried in a press release today was an announcement that Experian will once again “make FICO Scores available to consumers through myFICO.com and through third parties.”

“This is great news for consumers,” said credit scoring expert John Ulzheimer, the president of consumer education for SmartCredit.com who tipped me off to this important development.
After withdrawing from its partnership with MyFico.com, Experian continued to sell credit scores to consumers–but they weren’t the same scores lenders typically used. One score Experian sells, the PLUS score, isn’t used by lenders, while the VantageScore is used by about 10% of lenders. FICOs, on the other hand, are the leading score, so being able to get them again from Experian is a real boon.