Last week Equifax, one of the three largest credit agencies in the U.S., joined scores of other companies who have suffered major data breaches. This time, it affected 143 million people—nearly half of all U.S. consumers. And, because Equifax is a primary provider of credit reporting, the data stolen includes some of the most sensitive personal data available, including Social Security numbers, driver’s license numbers, birth dates, credit card numbers and addresses associated with someone’s full name.
In the face of this news, it’s natural to have a heightened awareness around the security of your personal data and identity. But, given our wired world, the job of securing everything in the public domain can seem overwhelming, if not impossible. There are still a few key things you can do to respond to this event and increase your comfort that you are doing what you can to protect your personal and financial data.
One of the major challenges of securing your data is that it’s in a lot of places. According to DashLane, the average number of accounts including financial accounts registered to one email address in the U.S. is 130! It’s simply unrealistic to expect one person to pay constant attention to all of their financial accounts when they are in so many places. If you consider all of the accounts and data for your entire family, the task can seem overwhelming.
One of the best ways to monitor all of your accounts and spot areas of concern is to use a tool that consolidates your financial account information in one place. Given this data breach, you may be hesitant to consolidate your account information. But remember that this information is already out there and having your information in a secure place will make it easier for you to see everything in the same place at one time rather than having to constantly log in to view your accounts in different places.
There are many online account aggregation tools to choose from today. For our clients, we use a consolidation tool that monitors the value and activity for each of their investment accounts giving them secure access to these details regardless of where the accounts are held. If you plan to use one, keep these tips in mind:
Consolidating your financial accounts using an online tool with these qualities will reduce the time and complexity when reviewing all of your accounts. Getting into this habit has an additional benefit —you’ll know your net worth and whether you’re on track to reach your financial goals.
Many account consolidation tools give you an option to be notified when any transactions fall outside of parameters you set. For example, you can ask to be notified about any activity that exceeds a certain dollar amount. This can act as an early warning sign of identity theft. Since many of us have multiple bank accounts, I also find this feature helpful in tracking larger transactions between accounts. You can go to one place to see activities like checks that have cleared, tax return deposits and larger automatic payments being processed.
Given that this recent data breach occurred at one of the main credit reporting agencies, it may seem counterintuitive to tell you to rely on a credit reporting organization to help secure your data. Actually, auditing the details on your personal credit report is one of the best ways to spot credit card-related theft. We recommend that you establish a process to periodically acquire and review your credit report from each of the three main reporting companies.
Beyond checking your actual credit score, look for more detailed information on your credit report which includes a list of outstanding and closed credit cards, as well as history on any creditor claims. Make sure you can identify everything on this list, and if something looks out of order, contact the credit reporting agency to investigate further and correct your credit. A side benefit of credit review is that you’ll be aware of any credit issues stemming from other joint account holders.
If you are divorced, it’s wise to review your credit report to make sure that any joint accounts, especially any that you may have forgotten about, are closed. That’s one of the reasons this advice also appears on our Moving On Post Divorce Checklist.
For parents of adult children, we recommend you work with them to help build a strong credit history and an equally strong habit of monitoring both their credit score and credit report. Our young adults have grown up online and they may not be as cautious as they should be when it comes to securing personal data.
If you’re a young adult reading this advice, we encourage you to diligently review the list of credit cards shown on your credit report. We’ve run into situations where the parent’s credit has impacted their adult child’s credit. For instance, if your parent opened a joint credit card with you to help you establish credit and you no longer need to use this card, then it’s a good idea to close it. Should your parents run into financial trouble, make late payments on this card or have credit issues, their actions could negatively impact your credit rating.
For both identity protection and overall financial awareness, you should know the passwords for all accounts in which you have an ownership interest. If you’re married or in a committed relationship, we recommend documenting all of your passwords and let each other know if you change any of them. You’ll need this information if you are using a consolidation tool that links into your separate accounts. As we outlined in In Case of Emergency: Creating Your Financial Option B, if your spouse or partner should die, you’ll need their password list to fill out the details of your financial picture and monitor any transactions when settling the estate.
If you’re not using an account, like an old credit card or bank account, then you should close it. Many bank and investment accounts have transaction histories as well as social security and other sensitive information. So, even if the account balance is zero, your data could be gathered and used against you. The end of the year is a good time to confirm the status on all your closed accounts as that’s when many companies send out notifications of active accounts.
If you want to add an extra layer of protection, you can lock down your credit report by placing a freeze on your credit. This won’t prevent someone from making unauthorized purchases in your existing accounts, but it will limit the access someone has to your credit reports making it more difficult for identity thieves to open accounts in your name since creditors will want to see your credit report before authorizing them.
If you plan to place a freeze on your credit, you’ll have to notify all three of the credit reporting agencies listed above. They will send you a confirmation letter with your PIN and password and you’ll need these if you want to lift the freeze temporarily or permanently, so put them in a safe place. Plan ahead if you want to lift the freeze as it may take three days for the credit agencies to fulfill your request.
The cost to place and lift a freeze with each credit agency depends on the state in which you live. Both the District of Columbia and Virginia require $10 to place a freeze and it costs nothing to lift it. In Maryland, expect to pay $5 to both place and lift a freeze. If you are a victim of identity theft, there is no cost to place or lift a freeze.
For more detailed information, see the Federal Trade Commissions Credit Freeze FAQs.
If you would prefer not to lock down your credit report, but want some greater piece of mind, you can put a 90-day fraud alert on your account. This requires creditors to notify you before issuing credit in your name. You just need to notify one agency for this to be in force with all three.
The Federal Trade Commission has also put together this comprehensive report on Identity Theft Protection Services and we recommend that everyone consider this type of service. They also provide some really great resources and steps to take should you be a victim of identity theft.
Given the increasing frequency and high-profile nature of online security breaches, you may wonder if anything you do will really make a difference. While you may not be able to stop someone from getting your personal or financial information, being aware of your financial accounts and transactions can help you mitigate any damage by taking action early on.
Shawn: Now you hear all kinds of deals about leasing cars, how can you negotiate a better deal if you want to lease?
Nina: Okay, well many people don't realize that they can actually negotiate the sticker price on a leased car in the same way that you would do that if you're buying a car. And since when you lease -- when you're, you know, your lease payments basically cover the depreciation, the difference between the sales price and the residual value. So it's definitely in your best interest to try to reduce that sales price as much as possible because then you'll pay you know, smaller dollars over the life of the lease. Make sure you pay attention to the down payment at the lease signing. And so here's an example, you might see an ad that says you know, lease payment is only 1.99 a month and that sounds like a great deal for thirty six months. The catch is, is that it might require a $3,600 down payment. So, if you amortize the down payment, then actually that 1.99 special, becomes 2.99. So, you really have to kind of look at total costs.
And then lastly, dealerships use the term, money or lease factor, when they're calculating your financing costs and a lease factor is not the same as an interest rate. So, you have to make sure the dealer converts that lease factor into a comparable interest rate so you know what your financing charges are.
Shawn: At the end of the day, does one method wind up being more expensive more often than the other, or can we tell that?
Nina: You know what, it really depends on how long, if you're going to hold the car for a long time, you're better off buying. But if you know, and if you're not, if you just really enjoy driving and you want to have a new car, then go ahead and lease. I mean, there's pros and cons to both, to be honest with you, it's not one size fits all.
Shawn: Alright Nina, great. Happy Thanksgiving to you. Alright, Nina Mitchell is with The Colony Group, for more go to wtop.com and search Her Wealth.
Consider this your training manual to get and stay financially fit for life!