Your financial life may be negatively affected by a company that, until recently, you may well have never heard of, or only been dimly aware of.
Earlier this month, Equifax announced that hackers may have gotten access to the personal information of as many as 143 million Americans. If you don’t think much about your credit score — after all, plenty of people go years without applying for a home, car or credit card and thinking much about their credit reports — you may be wondering right about now: What is Equifax? How does the hacking affect me? And why does it have my financial information?
Hopefully the following answers will help clear things up.
[See: 7 Signs Your Romantic Partner Is Financially Unstable.]
What is Equifax? The simple explanation is that Equifax is a credit reporting agency and based on the information that they have on consumers, they come up with a credit score. When a consumer applies for a loan, be it a house, car, a credit card, a personal loan from a bank and so on, the lender requests information from companies like Equifax (the other two big credit reporting agencies that lenders routinely go to for credit reports and credit scores are Experian and TransUnion). Equifax will then send over the credit report and credit score to the lender. Based on that credit history the lender can then make a decision to give you a loan, or not give you one, and what your interest rate will be.
It probably should also be noted that it’s been reported that Equifax’s subsidiary, The Work Number, sells some of its data to debt collectors and financial companies and other organizations. So in short, Equifax is a company that holds a lot of personal information on a lot of people.
How does the hacking affect me? Hopefully, it didn’t and won’t, but given that personal information from 143 million Americans was put at risk, nobody can feel too good about their odds.
Nolan Taylor, clinical assistant professor of information systems with the Indiana University Kelley School of Business, says there are two primary risks.
“The first is the possibility that the scammer essentially becomes you and is able to obtain new accounts in your name,” he says. In other words, a classic case of identity theft. The crook could take out a credit card in your name, buy a bunch of stuff and never pay it back, leaving you on the hook to work it out.
“The second risk is that a scammer may gain sufficient information to attempt to access your current accounts. This second risk is often overlooked and may not be addressed by credit monitoring,” Taylor says. “For example, with enough information, it may be possible to file a tax return in your name and collect the tax refund.”
Taylor adds that the Federal Trade Commission suggests that you file your taxes early as a preventative measure.
As if filing taxes weren’t already fun enough.
[See: 25 Ways to Fix Your Finances Fast.]
Why does Equifax have my financial information? All credit bureaus have it. They collect the financial information that goes on your credit report, and with that information, credit bureaus sell their data to banks, credit unions, insurance firms, retailers, utilities and government agencies — generally any company or organization that is involved in your financial life.
And there’s a good reason why they store personal information to your past address and phone numbers, says Curtis Nicholls, associate professor of accounting at Bucknell University in Lewisburg, Pennsylvania.
“This data is often used when applying for new credit to verify the identity of applicants,” he says.
So technically consumers should want credit reporting companies like Equifax to have our personal information, so we can prove who we are. The problem is, of course, when hackers can steal that personal information, then it’s hard to stop them from trying to prove that they are us.
“In this case, an identity thief with access to the Equifax data would be able to use an individual’s social security number to apply for credit, then verify their phony identity with the Equifax historic information,” Nicholls says.
“Unfortunately, I don’t see any mechanisms to fully protect an affected individual’s credit. Full protection would require a new social security number, which is close to impossible.”
Breaches like this are just going to become more and more common, says Alp Hug, the COO of Zenedge, an Aventura, Florida-based company that provides cloud-based, artificial intelligence-driven cybersecurity solutions.
[See: 10 Money Mistakes New Grads Make.]
“Everyone is still thinking too small about the size and scope of the cyber threat landscape. While everyone was simply preparing for the next Target-caliber hack and breach and its associated number of credit card data exposed, here we find hackers going after the main source for credit, Equifax,” Hug says. “The hackers are better, stronger, utilizing more sophisticated and more complex techniques and methods. But more importantly, they are going after bigger, more impactful targets.”
In other words, Hug says, offering up a grim analogy, “Why go after one nuclear plant, when you can shut down the entire continent?”
It’s probably best not to freak out about all of this, however. You can try to do a credit freeze. You should certainly monitor your credit cards and bank accounts and be on the lookout for suspicious behavior involving your finances. But acting rashly means that you’re even more vulnerable to identity thieves looking to get your information. After all, the Federal Trade Commission is already warning consumers about potential scams related to the hacking and to be very wary about giving out personal information to people over the phone. If “Equifax” calls you to discuss your personal information, the FTC warns, that’s not Equifax.
More from U.S. News
12 Habits to Help You Take Control of Your Credit
12 Simple Ways to Raise Your Credit Score
What to Do If You’ve Fallen (Way) Behind on Your Credit Card Payments
What Is Equifax and Why Does It Have My Financial Information? originally appeared on usnews.com
