Equifax hack: Freezing your credit isn’t enough

The Equifax hack exposed the names, addresses, birthdates and Social Security numbers of up to 145.5 million Americans. Drivers license information for 10.9 million people was also exposed, according to a Wall Street Journal report.

Credit freezes won’t prevent criminals from taking over credit, bank, retirement and investment accounts, says security expert Avivah Litan with Gartner Research. Thieves also could use the purloined information to snatch your tax refund or mess with your Social Security benefits. Your email, phone, shopping and cloud-based storage accounts aren’t safe, either.

Read my Associated Press column for the steps you should take now.

Q&A: Free credit monitoring won’t prevent identity theft

Dear Liz: I thought I would share some information in light of the Equifax disaster.

Two of my credit card issuers provide free credit monitoring. Capital One scans my TransUnion file and Discover uses Experian. Both send email and text alerts about new activity and a monthly “reassurance” email when no such activity turns up in the previous 30 days.

Along with the credit freeze I placed at Equifax, I feel pretty secure at the moment. I’m sure that other credit card issuers have similar programs in place, and perhaps people should ask their financial institutions if such monitoring is available to them as account holders.

Answer: Free credit monitoring can certainly be helpful, but understand that it can’t prevent identity theft. At best, credit monitoring alerts you after the fact if someone has opened a new account in your name. Only credit freezes at all three bureaus can prevent those accounts from being opened in the first place.

Unfortunately, credit monitoring and freezes can’t help you with the most common type of identity theft, which is account takeover. That’s when someone makes bogus charges to your credit cards or steals money from your bank accounts.

Financial institutions use different types of software to detect fraud, but nothing replaces vigilance on the customer’s part. We should be reviewing transactions on our accounts at least monthly if not weekly. Online access to accounts can help you better monitor what’s going on.

You also can set up alerts that will email or text you if large or unusual transactions happen. (Just beware of a common scam where you’re texted an “alert” that your account has been frozen, along with a link that encourages you to divulge your login information.)

Even if you do everything in your power to avoid identity theft, you still can’t prevent scammers from using your information to file bogus tax returns, get medical care or commit criminal identity theft (by giving your name to the police when they’re arrested, for example). As long as Social Security numbers are used as an all-purpose identifier by businesses and government agencies alike, you can’t make yourself completely secure.

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.

Q&A: When student debt payoff becomes complicated by identity theft

Dear Liz: I went back to school in 2002 to get my teaching credential. I took out several student loans and set up a repayment plan upon graduating with automatic deduction out of my checking account. Several years ago, the IRS started garnishing my bank account stating that there was a lien but I never received any other type of indication what was going on.

After contacting the IRS, we found that someone took out a fraudulent student loan using my former married name. I also got my credit reports, which showed the loan. I was able to get the signed loan documents from the U.S. Department of Education but now the department does not respond to my certified letters or phone calls.

I’m at a loss at what to do at this point. I filed a police report and notified the credit reporting agencies. I’m out almost $10,000. Is there any other advice you could give me?

Answer: First, follow up with the credit bureaus to make sure the fraudulent loan has been removed from your credit reports. Consider setting up credit freezes at all three bureaus to reduce the chances of being victimized again. The Identity Theft Resource Center at www.idtheftcenter.org has more information to help you protect yourself.

Getting the actual loan dismissed and your money back is a more difficult task. You may be able to have the loan erased under what’s known as a false certification discharge, but qualifying for that isn’t easy, said Jay Fleischman, a Los Angeles attorney who specializes in student loan problems.

It’s not enough to have a police report. You’d need to identify and file a lawsuit against the thief. If you can get a court judgment against that person, you would provide the Education Department with that as well as proof of your identity and possibly signature samples from the approximate date of the loan.

Even if you did everything necessary to prove eligibility for discharge, the department could still deny it if you received any benefits from the loan — if it paid any costs of your education instead of someone else’s, Fleishman said.

At this point, you may need to hire an attorney familiar with identity theft issues. You can get referrals from the National Assn. of Consumer Advocates at www.naca.net.

Q&A: Too many cards?

Dear Liz: My husband and I have opened accounts to take advantage of 0% interest financing for special purchases. These accounts are paid in full prior to the end of the promotional period and we don’t use them again. I’ve read to not ever close any accounts, but am nervous about having so many accounts open with such high limits. Is there potential for issuers to stop granting us credit because we have so much available? Are we at greater risk for identity theft with all of these open accounts?

Answer: People used to believe that closing accounts could somehow help their credit scores. Credit scoring companies and experts have done their best to combat that myth, but in doing so have left some people thinking that they can’t ever close unneeded accounts. That’s not true either.

Your credit scores won’t be hurt by having “too many” accounts with high limits. That’s generally a good thing, since multiple lenders have deemed you creditworthy. You get the most credit scoring benefit, though, from accounts you’re actively using.

Leaving unused accounts open can leave you more vulnerable to fraudulent account takeover. At the very least, it adds to the hassles in your life, since you have to keep an eye on all your accounts. And conceivably a lender could balk at seeing a lot of unused credit lines, even if it didn’t hurt your scores.

You don’t want to close accounts if you’re trying to improve your scores or in the market for a major loan, such as a mortgage or auto loan. Otherwise, though, you shouldn’t worry about closing an account now and then if you’re not using it.

Wednesday’s need-to-know money news

Today’s top story: Victim of ‘Divorce Season’? Protect Your Finances. Also in the news: Mixing up these student loan terms could cost you, why deductions aren’t the only way to save on real estate taxes, and why you still need to cut up your canceled credit cards.

Victim of ‘Divorce Season’? Protect Your Finances
March and August are bad months for marriage.

Mixing Up These Student Loan Terms Could Cost You
Know your student loan vocabulary.

Deductions Aren’t the Only Way to Save on Real Estate Taxes
Alternative tax incentives.

Do You Still Need to Cut Up Your Canceled Credit Cards?
Get the scissors.

How to help your parents protect their money

Our financial decision-making abilities peak in our 50s and can decline pretty rapidly after age 70, researchers tell us. That’s how otherwise smart older people fall for sweepstakes frauds, Nigerian investment schemes and the grandparent scam, where con artists pretend to be grandchildren in a financial jam.

But few people want to hear that they’re not as sharp as they used to be. Many won’t recognize the rising risk of losing hard-earned life savings as they age, says financial literacy expert Lewis Mandell, author of “What to Do When I Get Stupid: A Radically Safe Approach to a Difficult Financial Era.”

“As our ability to make sound financial decisions decreases with age, our self-confidence in this area actually increases,” Mandell says.

In my latest for the Associated Press, what adult children can do to protect the finances of their parents.

Tuesday’s need-to-know money news

Today’s top story: How medical bill advocates can slash your costs. Also in the news: How two-factor authentication protects your online info, how investing apps can foil financial planning, and four credit card trends for 2017.

How Medical Bill Advocates Can Slash Your Costs
An advocate will go to bat to reduce your medical costs.

How Two-Factor Authentication Protects Your Online Info
Taking the important steps to protect your online information.

Investing apps can foil financial planning
Trusting your intuitions.

4 credit card trends for 2017 and what they mean for you
The good news and the bad news.

Your mother’s maiden name is not a secret

Your mother’s maiden name is probably not a secret. Neither, necessarily, is your high school mascot or the size of your car payment. But some banks and brokerages still pretend this is information only you would know, and that could be putting your money at risk.

So-called security questions long ago outlived their usefulness, since they can be hard for the right people to remember and easy for the wrong people to guess or steal.

In my latest for the Associated Press, why security questions are no longer the most secure way to protect your information.

Q&A: Getting help with credit scores after identity theft

Dear Liz: Would you please help readers learn how to fix credit scores after identity theft? I have been a victim at least eight times in the past five years. I have filed three police reports regarding these matters and sent them along with other proof to the big three credit report agencies. Only one quickly answered and deleted the false entries.

Answer: You have a friend in the Consumer Financial Protection Bureau.

In the past, complaints about credit bureaus went into a black hole. The Federal Trade Commission collected them but warned consumers that it couldn’t expect any action on their individual cases. The Consumer Financial Protection Bureau, by contrast, forwards consumer complaints directly to the financial company and works to get problems solved. The bureau says 97% of complaints get a timely response.

Before you make your complaints, though, you should check your credit reports again. One bureau may have been faster in responding, but the other two may have since deleted the bogus accounts.