Protecting Yourself

THERE ARE FIVE KEY scenarios where hackers could potentially wreak havoc with your financial life. Data thieves could:

• Rack up charges on your credit cards.
• Apply for a loan or credit card using your identity.
• Steal money from your financial accounts.
• File a false tax return claiming a refund.
• Steal your medical information and then use it to, say, fraudulently fill prescriptions or submit medical expenses for insurance reimbursement.

How can you defend yourself? In addition to the precautions described in the previous section, there are three specific steps you might take. First, if it’s offered by the financial institutions you use, set up two-factor authentication for your accounts. With two-factor authentication, your financial institution will text you a special code to use every time you log on or every time you log on from an unrecognized computer. This is crucial protection—because a big chunk of your wealth is likely sitting in your investment accounts.

Second, consider freezing your credit with the three major credit bureaus. This will prevent someone from taking out a loan or credit card in your name. Alternatively, you might contact one of the credit bureaus and set up a fraud alert. A fraud alert requires lenders to take extra steps to confirm your identity. Both credit freezes and fraud alerts are discussed in the next section.

What about credit monitoring instead? The problem is, by the time you hear that someone has applied for credit in your name, you already have a problem. Still, if you want to monitor changes to your credit report, there are free services now available, including those offered by CreditKarma.com and WalletHub.com.

What’s the third step? You should regularly check your credit reports for errors and for accounts you don’t recognize. Once every 12 months, you can get your reports for free from each of the three major credit bureaus by going to AnnualCreditReport.com. A popular strategy: Rotate through the three credit bureaus, checking one report every four months.

Even with the above steps, you’ll likely find someone occasionally steals your credit card information and charges items to your account. This seems to be an unavoidable reality of modern financial life—though credit card companies appear to be pretty good about detecting questionable charges and reimbursing those that slip through. Want to monitor your cards closely? See if your bank will send you texts every time there’s a new charge on one of your credit cards.

If someone has your personal information, there’s no way to prevent them filing a fraudulent tax return. This, however, is an area where early filers have an edge: If your return reaches the IRS first, the fraudulent return will be the one rejected. You might also aim to owe taxes each year, so a fraudulent return doesn’t temporarily leave you out of pocket by delaying the refund you expect. What if you are a victim of tax identity theft? The IRS will issue a special personal identification number to use thereafter. Meanwhile, there doesn’t seem to be much defense against theft of health care information—beyond staying vigilant with your personal information and keeping an eye out for suspicious health care charges.

Next: Credit Freezes

Previous: Identity Theft

Articles: Stop Bank Robbers, Anti-Social Behavior, For Safety’s Sake, Be Careful Out There, Bad Guy on Line One, Copycat Crime, A Tangled Web, Losing It All, Don’t Fall for It, Beat the Cheats, Nothing to Chance, Beefing Up Security and Playing Defense