Identity theft and credit fraud can create serious financial problems—and they can become especially disruptive when you are preparing to buy or refinance a home.
Fortunately, there are several steps you can take to help protect your credit and personal information. Some are simple habits, while others—such as freezing your credit—can provide an additional layer of protection against someone attempting to open accounts in your name.
1. Review Your Credit Reports Regularly
One of the simplest ways to protect yourself is to periodically review your credit reports for accounts or activity you do not recognize.
Look for unfamiliar credit accounts, incorrect balances, addresses you do not recognize or other information that could indicate an error or possible identity theft.
You can obtain your credit reports through AnnualCreditReport.com, the federally authorized website for free credit reports.
2. Consider Freezing Your Credit
A credit freeze is one of the strongest tools available for helping prevent someone from opening a new credit account in your name.
When your credit is frozen, prospective creditors generally cannot access the frozen credit report. Because lenders typically need access to your credit before approving a new account, this can make it much more difficult for an identity thief to obtain new credit using your information.
A credit freeze is free to place and free to lift, does not affect your credit score, and remains in place until you lift it.
To fully freeze your credit, you need to place a freeze separately with each of the three nationwide credit bureaus:
- Equifax
- Experian
- TransUnion
You do not have to wait until you become a victim of identity theft to freeze your credit. Anyone can choose to do it as a preventative measure.
3. Understand the Difference Between a Credit Freeze and Fraud Alert
A fraud alert is different from a credit freeze.
A credit freeze restricts access to your credit report. A fraud alert allows creditors to access the report but tells businesses to take additional steps to verify your identity before opening new credit in your name.
If you are or suspect you may be affected by identity theft, an initial fraud alert is free and lasts for one year. Unlike a credit freeze, you only need to contact one of the three nationwide credit bureaus to establish an initial fraud alert. That bureau must notify the other two.
Victims of identity theft who meet the applicable requirements may qualify for an extended fraud alert that lasts seven years.
4. Use Strong, Unique Passwords
A stolen password can provide access to much more than a single account.
Avoid reusing the same password across your email, banking, credit card and other important accounts. If one company experiences a data breach, a reused password can potentially give a criminal access to additional accounts.
Long, unique passwords or passphrases are generally more difficult to compromise. A reputable password manager can also help you create and manage unique passwords for different accounts.
5. Turn On Two-Factor or Multi-Factor Authentication
Whenever possible, enable two-factor or multi-factor authentication on important accounts, particularly your email, bank accounts, credit cards and other accounts containing financial or personal information.
This requires an additional form of verification beyond your password, making it more difficult for someone to access your account even if your password has been compromised.
When available, authenticator apps or security keys can provide stronger protection than verification codes sent by text message.
6. Be Extremely Careful With Unexpected Emails, Texts and Phone Calls
Identity thieves frequently use phishing emails, text messages and phone calls to trick people into providing passwords, account numbers, Social Security numbers or other personal information.
Be cautious about clicking links or opening attachments in unexpected messages—even when the message appears to come from a bank, lender, government agency or company you recognize.
If you receive a message asking you to take action on an account, consider contacting the organization directly using a phone number or website you already know is legitimate rather than using the contact information contained in the unexpected message.
7. Monitor Your Bank and Credit Card Accounts
A credit freeze can help prevent new accounts from being opened, but it does not prevent fraudulent activity on accounts you already have.
Review bank and credit card transactions regularly and investigate charges or withdrawals you do not recognize.
Many financial institutions also allow you to activate transaction alerts that can notify you when a purchase, withdrawal or other account activity occurs.
8. Protect Your Personal Documents and Information
Be careful with documents containing Social Security numbers, account numbers and other sensitive information.
Keep important financial documents secure and properly destroy documents containing sensitive information before disposing of them.
You should also be cautious about how much personal information you make publicly available online. Information such as birthdays, family information and other personal details can sometimes help criminals answer security questions or impersonate you.
9. What If You Are Buying a Home and Your Credit Is Frozen?
You can still apply for a mortgage if you have frozen your credit.
When your lender needs access to your credit report, you can temporarily lift the appropriate credit freeze and then place the freeze back into effect after the necessary credit check has been completed.
If you are planning to buy or refinance a home, let your loan officer know that your credit is frozen. We can coordinate the timing of the credit review so that you know when access is needed.
A credit freeze should not discourage you from protecting your identity simply because you may apply for a mortgage in the future.
10. What Should You Do If Your Identity Has Already Been Stolen?
If you discover accounts you did not open, fraudulent transactions or other evidence that someone is using your personal information, act quickly.
Contact the affected financial institutions or creditors and take steps to secure the accounts involved.
You can also report identity theft through IdentityTheft.gov, the Federal Trade Commission’s identity theft reporting and recovery website. The site can provide a personalized recovery plan based on what happened.
Depending on the circumstances, placing credit freezes and fraud alerts may also be appropriate.
Protecting Your Credit Before Buying a Home
Good credit protection is important at any time, but it becomes particularly important when you are preparing for a mortgage.
Unauthorized accounts, fraudulent balances or identity theft can potentially affect your credit profile and complicate the mortgage process. Reviewing your credit early gives you time to identify and address problems before you are under contract to purchase a home.
If you are considering buying a home, we can review your mortgage credit as part of the pre-approval process and help you understand whether anything on your credit report needs attention.
Questions about your credit before applying for a mortgage?
Call or text me at 240-670-5090 or email me at CJMT@mainstreethl.com.
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