I admit it: Although a financial professional, I knew little about how credit monitoring companies worked. Yes, I knew enough to check my credit report (for free) every four months at either Equifax, Trans Union, or Experian. But I didn't think about these firms and the security of my financial identity. After all, credit monitoring companies weren't the problem.
Until they were.
The privacy breach at Equifax, affecting more than half of all adults in the U.S., changed my blind faith in the credit monitoring systems. From now on I will operate (you should too) with the expectation that bad people, somewhere, have access to all the information they need to steal your financial identity.
What to do now?
First course of action: block everyone, including ourselves, from access to our credit information. (Now commonly called "Freezing" your credit.)
No doubt freezing our credit is a hassle and could cost a few bucks to both freeze and thaw. But if frozen, no merchant is likely to extend credit in your name - even to you. And perhaps that's a very good thing.
There is no doubt in my mind that U.S. citizens use too much credit. Going through the process to
freeze and then
thaw our credit information might be just the obstacle needed to slow down our use of debt. Would we all be better off paying cash for our next car? You bet. How about that furniture suite for the living room. Same thing.
In fact, CAVU has long advocated for simplifying your financial life - even going so far as to recommend having only one credit card in your name. There are two reasons for this: to help with financial organization, and to help with monitoring fraudulent transactions in open credit accounts.
Several million Americans had already frozen their credit information prior to the Equifax debacle. Kudos to them! They've had few worries about credit account fraud. As of this week, I'm joining them.
It's a new paradigm for me. I won't use as many sources of credit, and the credit I do use will be a little harder to access and take more effort to set up. But I'll probably save more, spend less, and sleep without fear of a major fraud event in my life. Sounds like a contentment trifecta!
How to freeze your credit
I'm only going to speak to using a digital method, since I've mostly abandoned the telephone and regular mail for all things financial. If you are of a like mind, read on.
First, don't even attempt this without a password manager. You'll be opening new digital relationships with the four top credit monitoring firms. Some require passwords and some will give you a 10 digit password that you will have to remember (so that you can unfreeze your credit when necessary). This will be easy when you have a password manager. I use Dashlane, others at CAVU use LastPass - both of which we recommend. I have 286 passwords and don't know any of them! Ah, password freedom. But I do know my master password which opens access to all the rest.
Second, go to each firm's website and find the area associated with locking your credit information.
I've spent over an hour working the sites and I'm not complete yet. Both my wife and I are freezing our credit, despite the fact that neither of us was "likely affected" by the Equifax breach.
Here is a "cheat sheet" assembled by Equifax that lists fees to freeze and thaw your credit, depending on the state where you reside and the event that causes the freeze.
Notes on my recent experience
Innovis: quick, easy, and probably free. They will send me a letter confirming my freeze.
Experian: relatively straightforward, but we were charged $10 for each freeze. I don't need a log-in or password, but I'll need a ten digit pin to unlock my account in the future. (Easy to remember, of course, with a password manager.)
Transunion: has a product called True Identity. I had to set up online accounts with passwords.
Equifax: The process is incomplete. They say I'll receive an email soon which will allow me to complete the freeze. According to recent news, the process is free until November 21st. How generous.
Note: This whole process is in a state of flux, with each credit agency adjusting its process depending on feedback (outrage!) and market dynamics. However, we suggest acting now and hope for refunds on any fees that you do get charged to set up the freeze.
While the Equifax breach is far from ideal, there has never been a better time to start protecting your financial identity, to simplify your financial life, and to use less credit. I, for one, am thankful for the kick in the pants to take action.