New year, new you—right?
Not if the “new you” is actually an identity thief wrecking your credit by making lavish (and unauthorized) purchases on your credit cards, opening up fraudulent accounts and destroying your financial reputation.
Here are five smart practices to help you defend your credit and ensure that the “new you” is still you—but perhaps with more secure credit.
Freeze Your Credit
When you apply for a new line of credit, a lender orders a credit inquiry to verify your credit health is satisfactory. This, of course, allows the lender to access your credit report in order to process your application.
When identity theft occurs, thieves often attempt to open entirely new credit lines in the name of their victims. This helps them stay undetected longer—we’re less likely to notice a new line of credit on our report than we are unauthorized charges on an existing one.
To prevent thieves from opening unauthorized lines of credit, put a security freeze on new credit inquiries. Because a would-be thief will need to make an unauthorized credit inquiry to open a new line of credit, preventing inquiries by anyone but you makes opening new lines impossible without lifting the freeze. This does mean that you’ll need to lift the freeze every time you want to open an account.
Review Your Reports
Catch thieves quickly—before they do too much damage. To do this, review your credit report and monitor it for unexpected changes.
Your credit report contains information on the credit lines you hold, the types of credit lines you’ve taken out, and your credit score.
Several factors affect your credit score: the age of your credit lines, how diverse your accounts are and the amount you’ve borrowed versus the amount you’ve paid off (also known as credit utilization). The report helps lenders answer questions like, “does this person pay their bills on time?”
Your credit report can make or break your ability to get a credit card, qualify for a mortgage or move into a new apartment—it’s an incredibly important document that warrants regular review.
If you pull your report and notice that you have a credit card you’ve never heard of or see that your score has plummeted without any change in your credit habits, it could indicate something shady is going on. A new account or purchases that add up to a hefty increase in your credit utility can both cause your credit score to decrease. Keep an eye on your score, pull and review your reports regularly, and monitor for unauthorized accounts.
You can request a free copy of your credit report for free every 12 months from each of the three major consumer reporting companies (Equifax, Experian and TransUnion).
Use Multifactor ID
Setting up extra security on online accounts may feel like overkill, but augmented security features often provide the only real barrier between authorized and unauthorized activity.
Multi-Factor ID systems leverage layered authentication requests to reinforce account security by asking a user to provide something only the user can know, something only the user has, something only the user is, or somewhere only the user is located.
For example “something only I know” might be a password—something like my childhood best friend’s last name, my high school grade point average or my favorite book. “Something only I have” might be a physical object like the credit or bank card itself or a security USB stick. “Something only I am” might refer to biometrics, like a fingerprint or retina scan. “Somewhere only I am” refers to a preset location—if the system knows I should be in Colorado but charges are made in California, an alarm goes off and the lender can deny further charges and begin an investigation immediately.
Most accounts have the option to set security questions or locations in addition to your regular passwords or security tokens. You may also have the option to get a text with a one time use code each time you use your account. Time spent bolstering your account security beats time spent trying to repair your credit.
Use Virtual Card Numbers
Using virtual credit card numbers provides an excellent means to be sure that your credit information remains safe while shopping online. Virtual card numbers are limited-use tokens linked to a concrete credit card account and generated by an extension or app for exclusive use at the time of purchase. If your virtual card number is temporary, this means that the card number isn’t valid anywhere else, even though it’s linked to a credit card account itself.
When you make purchases online, if the virtual number you’re using is intercepted because the transaction wasn’t as secure as a site led you to believe, or if a data breach affects the vending website, an aspiring thief wouldn’t be able to use your card anywhere else because in most cases after your purchase is complete, the virtual number is no longer valid.
Enroll with ID Theft Protection
ID theft protection programs provide 24/7 credit monitoring. Alerts notify users whenever an inquiry is made, a score changes significantly or fraudulent activity is suspected. Many programs even offer insurance for financial losses that result from fraud.
ID theft protection services may be purchased directly from credit bureaus, through insurance companies, or from a third-party provider. If you’re wondering which option works best for you, we’ve already done some of the groundwork for you to identify the best identity theft protection services that are currently available.
Bottom Line
Your credit weighs heavily on your financial well-being—it determines your eligibility to borrow money, finance large purchases and find a place to live. Use these tips to protect yourself, your finances, and your credit in the new year so that you can focus on what’s actually important: being you.
