Credit Monitoring

Consumer Financial Protection Bureau Director Richard Cordray warns, "your information is always at risk, every day."

Last month, a nationwide beauty products chain discovered a breach in its payment systems and a fresh batch of 282,000 stolen credit and debit cards reportedly went on sale in a popular underground crime store.

Also last month, Indiana University reported that information including names, addresses and Social Security numbers of those who attended any of the university’s campuses from 2011 to 2014 was unsecured for more than 11 months because security protections weren’t working correctly.  Purdue associate professor of communication Josh Boyd states, “The recent security breaches at IU, at Target, and the NSA revelations, I think are a good reminder that the online environment involves no guarantees.  If you put information online and somebody really wants it, it’s vulnerable.”

About the well-publicized Target security breach during last year’s Christmas shopping season, Purdue professor of cyber forensics Marcus Rogers warns, "People have to be vigilant for the next six months, year, even up to two years.”

The ProtectMyID credit montoring service offered by Target is a product of Experian, a credit reporting agency, and monitors changes only to a consumer's Experian credit report.  According to Consumer Reports, “The service can give consumers a false sense of security, and Consumer Reports can recommend this deal in its present form only as being better than nothing, and only for consumers who understand its significant shortcomings.”

Last month, Credit Karma settled with the Federal Trade commission on charges that the company “failed to take reasonable steps to secure” its mobile apps, “leaving consumers’ sensitive personal information at risk.” The company offers a “free” credit score based upon a consumer’s TransUnion credit report.

“Credit bureaus use many different scoring models, even within the same credit bureau. Each bureau can use dozens of different credit score models based on the requirements of different lenders,” Credit Karma explains.  “Each credit score model has a slightly different formula that takes into account over 200 different factors of your credit report.”  The company also notes, “Because there are hundreds of credit scores that measure many different probabilities, consumers should not be overly concerned with the type of score or even their number.”  An acquaintance has offered to share her Credit Karma experience that may shed some light on how the company produces revenue so it can offer the “free” service.

The Indiana Attorney General informs consumers how to place a security freeze with Equifax, Experian, and TransUnion.  The Attorney General has also produced an ID Theft Victim Kit that outlines the steps to follow if a consumer becomes aware that personal information has been stolen or used by someone else.

The use of a credit monitoring service cannot prevent ID theft, and it appears that in some cases it may even increase the risk.  To monitor your own reports, order them through www.AnnualCreditReport.com, check for accuracy, and make sure that any errors are corrected.

If you’d like an estimated credit score, use a credit score estimator in which you do not disclose personally-identifying information. 

RELATED NEWS:

Today the Federal Trade Commission (FTC) announced that two data brokers, Instant Checkmate, Inc., and InfoTrack Information Services, sold consumer data in violation of the Fair Credit Reporting Act (FCRA).

The FTC alleges that Instant Checkmate violated the FCRA by failing to maintain reasonable procedures to ensure that those using its reports had permissible purposes for accessing them; furnishing reports to users that it did not have reason to believe had permissible purposes to access them; failing to follow reasonable procedures to assure that its reports were as accurate as possible; and failing to provide FCRA-mandated “User Notices” outlining several important consumer protections.

InfoTrack allegedly provided inaccurate information suggesting that job applicants potentially were registered sex offenders, possibly causing employers to reject their job application.  Other charges include failing to notify consumers when the company had provided public record information about them that is likely to have an adverse effect upon their ability to obtain employment.

Credit Reporting and Scoring

Based upon student comments and questions, here are a few more bits about credit reporting and scoring. 

According to Experian, there are only three types of public records that appear in a credit report:

• Bankruptcy
• Tax lien
• Civil judgments

Fair Isaac has produced a 20-page booklet, “Understanding Your FICO Score” and states, "Public record information includes: bankruptcies, foreclosures, tax liens, garnishments, legal suits and judgments."  We’re told that a criminal history is not included.  Of course, incarceration might lead to late payments on such as a credit card, and that would appear on a report.

Lenders and others use a credit score, but a score is not a part of the credit report itself.  Rather, it is a calculation based upon information in a report.  The most widely known is the FICO score developed by the Fair Isaac Corporation, and ranges from 300 to 850.  Today, a score of 740 or so should qualify a borrower for the best rates on, for example, a home loan.

In 2006, the three largest consumer (credit) reporting agencies Equifax, Experian and TransUnion, joined together and created the "VantageScore" which they claim is superior to FICO; each of the three also offers their own score from their own formula.

The "soft" inquiries by companies that are considering offering credit are not factored in the credit score.  If you want to “opt out” of pre-screened offers, you can do so through the Office of the Indiana Attorney General.

Money Management International recently published “Getting the Credit You Deserve”, and a very thorough article about credit scoring is "Why Your Credit Score Matters", written by in 2011 by personal finance columnist Liz Weston.

Some years ago before I was in the personal finance industry, I checked my own credit reports from the big three credit reporting agencies, and among them were 23 errors and a score spread of 100 points!  I found no derogatory information such as late payments or negative public records on any of the reports, and I saw no indication of attempted ID theft.  The credit reporting agency had negligently merged another consumer’s information with my own, apparently without comparing Social Security numbers, birth dates, or other information.

If I had applied for a loan at that time I might have been turned down.  Perhaps even worse, the loan might have been approved but at a high rate of interest.  Later another person’s auto loan appeared on one of my reports; I learned that it pays to be vigilant.

The Federal Trade Commission provides guidance about how to secure copies of your reports and how to correct errors.

There’s an eye-opening CBS 20/20 segment from February 2013, “40 Million Mistakes: Is your credit report accurate?”  The report reveals what certainly appears to be criminal activity in the credit reporting industry.  Make some popcorn, sit down with loved ones, and enjoy.  It looked like the Ohio Attorney General was planning to pursue the matter, but I haven’t heard more about it since.

FTC Announces Top National Consumer Complaints for 2013

Commission’s Annual Report Shows Identity Theft Continues to Top List of Complaints; American Consumers Report Losing Over $1.6 Billion to Fraud Overall

For Release February 27, 2014

Identity theft continues to top the Federal Trade Commission’s national ranking of consumer complaints, and American consumers reported losing over $1.6 billion to fraud overall in 2013, according to the FTC’s annual report on consumer complaints released today.

“Americans of all ages are vulnerable to identity theft, and it remains the most common consumer complaint to the Commission,” said Jessica Rich, director, Bureau of Consumer Protection. “We urge consumers to visit FTC.gov/idtheft for tips to prevent and mitigate the damage from identity theft.”

The Commission received more than two million complaints overall, as reported in the agency’s Consumer Sentinel Network Data Book 2013, of which 290,056, or 14 percent, were identity theft related. Thirty percent of these incidents were tax- or wage-related, which continues to be the largest category within identity theft complaints.

The highest reported age group for identity theft is 20-29, with 20 percent of complaints. Rich says that educating consumers on this topic is a top priority for the agency. Some of the FTC resources include Signs of Identity Theft, Immediate Steps to Repair Identity Theft, and How to Keep Your Personal Information Secure.

Of the more than 1.1 million fraud complaints (classified separately from identity theft) the Commission received, 61 percent of consumers reported an amount of money they had paid, which collectively added up to more than $1.6 billion.

The top 10 complaint categories include:

Category	Number of Complaints	Percentages
Identity Theft	290,056	14%
Debt Collection	204,644	10%
Banks and Lenders	152,707	7%
Imposter Scams	121,720	6%
Telephone and Mobile Services	116,261	6%
Prizes, Sweepstakes, and Lotteries	89,944	4%
Auto Related Complaints	82,701	4%
Shop-at-Home and Catalog Sales	66,024	3%
Television and Electronic Media	53,087	3%
Advance Payment for Credit Services	50,422	2%

The report details national data, as well as a state-by-state accounting of top complaint categories and a listing of the metropolitan areas that generated the most complaints. This includes the top 50 metropolitan areas for both fraud complaints and identity theft complaints. Florida is the state with the highest per capita rate of reported identity theft and fraud complaints, followed by Georgia and California for identity theft complaints, and Nevada and Georgia for fraud and other complaints.

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Download the Consumer Sentinel Network Data Book 2013 (104 pp)

Download the National Do Not Call Registry Data Book FY 2013 (22pp)