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How to Prevent Identity Theft

Follow these tips to safeguard your personal information, freeze your credit and monitor your accounts.
July 2, 2020
Credit Score, Personal Finance
How to prevent identity theft
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You’re unlikely to find a fail-safe way to prevent identity theft, but you can take steps to reduce your risk.

A study by Javelin Strategy & Research found that about 1 in 20 people nationwide were affected by identity fraud in 2019. Losses rose to a total of $16.9 billion, up 13% from 2018.

There are many kinds of identity theft and fraud. It can involve gaining access to someone else’s health insurance, establishing credit using a child’s Social Security number, changing email passwords, “updating” credentials to access an investment account and more.

Scammers take advantage of any opportunity they can, including the COVID-19 crisis. Not only that, but your information may already be exposed thanks to frequent data breaches. In this new reality, it’s smart to take steps to prevent malicious actors from using your personal information and ruining your financial life.

Here are 10 ways to lower your risk of identity theft.

1. Freeze your credit

Freezing your credit with all three major reporting bureaus — Equifax, Experian and TransUnion — restricts access to your records so new credit files cannot be opened unless you unfreeze your account. It’s free to freeze and unfreeze your credit at each bureau, and it provides the best protection.

Locking your credit is an easier alternative, but you may have less legal protection than with a freeze. All three credit bureaus offer an app that allows you to lock or unlock your credit on your smartphone.

If you don’t want to freeze your credit, look into identity theft protection services. While these companies cannot prevent identity theft, they can alert you when your personal information is used and help you recover from fraud. Credit monitoring services offered by the three main credit bureaus are similar, but they often fall short on protections, especially if the credit bureau itself suffers a data breach.

2. Safeguard your Social Security number

Your Social Security number is a master key to your personal data. Guard it as best you can. When you are asked for your number, ask why it is needed and how it will be protected. Don’t carry your card with you. Securely store or shred paperwork containing your Social Security number.

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3. Use strong passwords, add authentication step

Use a password manager to create and store complex, unique passwords for your accounts. Don’t reuse passwords. Adding an authenticator app can reduce your risk. Don’t rely on security questions to keep your accounts safe; your mother’s maiden name and your pet’s name aren’t hard to find.

4. Set up alerts

Many financial institutions will text or email when transactions are made on your accounts. Sign up so that you know when and where your credit cards are used, when there are withdrawals or deposits to bank and investment accounts and more. The sooner you know your account data has been used by someone else, the sooner you can report it.

5. Watch the mail

Stolen mail is one of the easiest paths to a stolen identity. Have your mail held if you’re out of town. Consider a U.S. Postal Service-approved lockable mailbox. You can also sign up for Informed Delivery through the USPS, which gives you a preview of your mail so you can tell if anything is missing.

Don’t assume past-due or collections notices are in error; they may be the first sign of identity theft.

6. Make liberal use of a shredder

Any credit card or bank statements that someone could fish out of your garbage shouldn’t be there in the first place. Shred junk mail, too, especially preapproved offers of credit.

7. Use a digital wallet

If you’re paying online or in a store, use a digital wallet — an app containing secure, digital versions of credit and debit cards. You can use it to shop online or at a compatible checkout terminal. Transactions are tokenized and encrypted, which makes them safer. In addition, contactless transactions have fewer health risks.

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8. Protect your mobile devices

Mobile devices can be a real risk. According to Javelin’s report, only 48% of us routinely lock our mobile devices.

Keep these tips in mind:

  • Use a password on your phone and set up a personal identification number on your cell phone account.
  • Keep software updated and use two-factor identification or authentification apps when available. Consider using an authenticator app rather than texts to your phone to handle two-factor authentication for financial, social media and other sensitive accounts.
  • Turn off Bluetooth unless you are using it.
  • Be aware that when you use public Wi-Fi, others may be able to see your data.
  • Be cautious about opening attachments, which can contain malware.

9. Check your credit reports frequently

As a result of the coronavirus pandemic, the three major credit reporting bureaus, Equifax, Experian and TransUnion, are giving consumers access to a free credit report weekly through April 2021. While most experts say it’s not necessary to check them that often, you may want to check to be sure that any accounts in forbearance or deferment are being reported properly. You can also monitor your free credit report from NerdWallet to receive alerts when there are changes and to keep an eye on your credit score.

10. Monitor your financial and medical statements

Read credit card and bank statements. Make sure you recognize every charge, no matter how small. Know due dates and call to investigate if you do not receive an expected bill.

Review “explanation of benefits” statements to make sure you recognize the services provided to guard against health care fraud. Store health care records securely and shred paperwork that’s no longer needed. Go directly to your insurance website rather than clicking on links in emails and be suspicious of calls asking for personal information on the pretext of completing billing or filling a prescription.

Stay alert

No matter how careful you are, you could become a victim. A restaurant employee could snap a photo of your card with a smartphone. You could hear on the news about a data breach that involves a credit card you have used or a store that you frequent. Having your data compromised does not mean that your identity will be stolen, but it is a reason to be extra vigilant.

The sooner you detect a problem, the sooner you can fix it. Regularly check your credit and accounts for signs of unauthorized use and know how to report identity theft.

 

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