A law has just come into effect in the States which allows American consumers to freeze and unfreeze their credit without paying a fee. Signed in May by Donald Trump, the Economic Growth, Regulatory Relief and Consumer Protection Act amongst other things, abolishes the not inconsiderable fees which were previously associated with freezing and unfreezing credit.
Will they do it? I’m not so sure given that, according to various surveys, only 8% to 20% of customers have enacted one in the last 12 months.
Surprising maybe, but what I found even more surprising is that whilst freezing credit is a key tool for consumers to use to safeguard their identity, it is not widely understood.
I was talking about this with friends this week. Friends who are professional people but not financial professionals. Their assumption was that a credit freeze was a freeze on the use of their credit cards.
Why would they not? It’s not exactly crystal clear is it? And they’re not alone. Researchers at the University of Michigan School of Information in Ann Arbor, also found plenty of consumers who thought that a credit freeze stops them from using their own credit cards, rather than restricting access to their credit files and stopping crooks opening credit reports in their name.
So with an apparent level of inertia in the States on credit freezing and unfreezing and a lack of understanding of the process here in the UK, it’s maybe a good time to consider our options. Time for a bit of a financial fire drill.
Putting your credit on ice, freezing it so that no-one can open an account in your name is one way to safeguard against identity theft but what else can we do as consumers to protect our credit and identity?
Lauren Lyons Cole of Business Insider compiled a thorough checklist earlier this year. And I couldn’t agree more with her recommendations. I believe now is a good time to give them another airing.
- Monitor your current accounts daily or weekly. Use an account-aggregation app like Mint or log into your various accounts to make sure all charges were made by you. If you see something suspicious, contact your bank immediately.
- File your taxes early. The IRS is cracking down on tax fraud, but there could be an uptick after the Equifax breach. Get your tax information organized early, and submit your return as soon as you receive your W-2 and 1099 forms. Added benefit: If you’re due a refund, you’ll get it sooner, and if you owe taxes, the amount isn’t due until April 15 regardless of when you submit your return.
- Use secure passwords and two-step verification. Because most identity theft occurs with existing accounts, one of the best things you can do is safeguard your data online, especially for accounts that contain identifying information and credit-card or other financial data.
- Set up alerts for new credit activity. Save yourself money and use a free credit-monitoring service, like Credit Karma or Credit Sesame. You can also set up a fraud alert or credit freeze if you’d like.
- Check your credit reports regularly. You can access one free copy of your credit report from each of the three bureaus once a year through the government-sponsored AnnualCreditReport.com. Set a calendar alert to remind yourself to do this every year, or pull one report every four months to be extra vigilant. While you’re at it, there may be things you can do to improve your credit score, fix any errors on your credit report, and optimize your collection of credit cards.
- Choose identity-verification questions and answers carefully. Additional identity-verification questions can help keep accounts secure, but not if you choose questions like “What street did you live on when you were growing up?” or “Where were you born?” that could easily be answered with access to your social-media account or other personal information.