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Protect your credit scores in the digital age

by Alliance America
September 9, 2023


In June 2023, a massive wave of data breaches occurred with MOVEit Transfer software, a managed file transfer system used to transmit highly sensitive information over the internet. The breach affected at least 1,000 organizations and exposed the data of roughly 60 million people, according to media reports.

The data that was exposed included names, addresses, Social Security numbers and financial information. Investigators have attributed the breaches to a notorious ransomware and cyber extortion gang.

The MOVEit data breach is a major concern for consumers who may have had their personal information exposed because the thieves can extort victims and threaten to publish stolen data if they don’t receive ransom payments.

The motivation to pay the ransom is high. The stolen personal information could be used to open fraudulent accounts in the victim's name. These accounts could then be used to make purchases or take out loans, which would damage the victim's credit score. If the thief does not make payments on the fraudulent accounts, the creditors may send them to collections, which could also damage the victim's credit score.

Why is protecting our data so crucial?

a person with a rope pulling the an arrow from red to green on a graph

In today's digital age, protecting our personal data has become more important than ever. From financial transactions to online shopping, our lives are increasingly intertwined with the digital world.

So why is protecting our data and our creditworthiness so crucial? First and foremost, our credit scores are a reflection of our financial well-being. They play a decisive role when we apply for loans, mortgages or even when we seek employment opportunities. A good credit score can open doors to lower interest rates and better terms on borrowing, while a poor one can restrict access to financial opportunities altogether.

Protecting our data ensures that this valuable asset remains intact and accurate. In addition to safeguarding our financial standing, protecting our data is essential for preventing fraud and theft.

With cybercriminals becoming increasingly sophisticated in their methods, it is alarmingly easy for someone to gain unauthorized access to sensitive information such as Social Security numbers or bank account details. If this happens, it could potentially lead to devastating consequences like drained bank accounts or false lines of credit opened in your name.

Furthermore, the aftermath of identity theft can be mentally and emotionally draining. It can take months or even years to rebuild your credit after falling victim to such crimes.

The stress of dealing with creditors, disputing fraudulent charges and repairing your reputation can have lasting effects on your overall well-being.

As much as companies invest in security measures like encryption and firewalls, there is always a possibility that vulnerabilities could be exploited by hackers. This makes it crucial for individuals to take proactive measures in securing their own personal data.

Are my credit scores at risk?

Our credit scores are based on sensitive information that can be attractive to fraudsters and identity thieves. Credit scores can be vulnerable to various risks in this increasingly interconnected world.

One major risk factor for our credit scores is data breaches, like 2023’s MOVEit hack. If you have ever been part of a data breach, your credit score could potentially be affected. Identity thieves might use your stolen information and good credit to open fraudulent accounts or take out loans in your name without your knowledge. They may target your credit score by maxing out credit cards under your name or taking out large loans that you'll ultimately be responsible for paying back. If you're a victim of identity theft, not only will it impact your financial stability but also have adverse effects on your overall creditworthiness.

Moreover, even without explicit instances of hacking or fraud, there are subtle ways in which our credit scores can be jeopardized. Late payments or defaulting on loans can significantly lower our scores over time if left unaddressed.

Additionally, having excessively high balances on multiple lines of credit can indicate financial instability and negatively impact our overall rating. It's important to recognize that the use of borrowed funds itself carries inherent risks for our credit scores.

Taking out too many loans within short periods can signal potential financial instability and lead lenders and creditors to perceive us as a higher-risk borrower.

Whether it's guarding against data breaches and identity theft or being mindful of payment histories and borrowing habits – taking proactive measures to ensure the security and integrity of our financial information is crucial. By staying informed, practicing good financial behaviors, and being cautious with our personal data, we can safeguard our credit scores and maintain a healthy financial future.

Why are credit scores important?

Credit scores act as a reflection of your borrowing history and financial responsibility. They provide lenders with a quick snapshot of your creditworthiness and help them determine the risk associated with lending you money. These three-digit numbers have significant significance for lenders, landlords, insurance companies and even potential employers.

A high credit score indicates that you have a history of managing your debts responsibly and are likely to repay loans on time. On the other hand, a low credit score may raise concerns about your ability to handle debt obligations.

Moreover, credit scores can directly impact the terms and conditions you receive when borrowing money. Lenders use these scores to determine the interest rates they offer on loans or lines of credit.

A good or excellent credit score can lead to lower interest rates, saving you money over time as you pay off your debts. Conversely, a poor credit score may result in higher interest rates or even outright loan denials.

Furthermore, credit scores don't just affect borrowing opportunities; they can also influence other important aspects of your financial life. For instance, landlords often check applicants' credit scores before approving rental applications.

A bad credit score may make it more challenging to rent an apartment or may require additional security deposits. Insurance companies also consider credit scores when determining premiums for various types of coverage like auto or home insurance.

Studies have shown that individuals with lower credit scores tend to file more insurance claims than those with higher scores, leading insurers to view them as higher-risk policyholders. In some cases, employers even review job applicants' credit reports as part of their hiring process — although this practice is subject to certain legal restrictions depending on the jurisdiction.

While an employer cannot access your actual numerical score without permission (in most cases), they can assess factors such as payment history, outstanding debts and any public records associated with your credit. Given these factors, it becomes evident that credit scores are essential and deserve our attention.

Whether you are applying for a loan, renting a home or seeking employment, a good credit score can open doors to more favorable opportunities. Therefore, it is crucial to understand how credit scores are calculated and take steps to improve or maintain a healthy score.

How can I protect my online data and credit score?

a digital shield with a lock and other digital assets surrounding it

To protect ourselves from the threat of data breaches, hackers, ransomware and identity thieves, we need to be vigilant about sharing personal information online only with trusted sources and ensuring that websites are secure before making any financial transactions.

Using strong passwords, regularly monitoring our accounts for any suspicious activities and staying up to date with the latest security measures are all crucial steps in safeguarding our data. Avoid easily guessable passwords such as birthdays or sequential numbers; instead, opt for a combination of letters (both uppercase and lowercase), numbers and symbols. Also, be wary of phishing attempts via email or phone calls that may request sensitive information such as Social Security numbers or account details.

It also is essential to regularly monitor your credit report for any suspicious activity or inaccuracies. You can request a free copy of your credit report from each of the three major credit bureaus – Equifax, Experian and TransUnion – once a year.

Scrutinize the report carefully for any unfamiliar accounts or transactions that could indicate fraudulent activity. To add an extra layer of security to your financial information, it's advisable to freeze your credit with all three bureaus.

This means that no new accounts can be opened in your name without unfreezing it first. By doing this, you reduce the risk of someone using your personal information to apply for loans or lines of credit without your knowledge. Legitimate organizations will never ask for this information through insecure channels.

By regularly monitoring your credit report, freezing your credit when necessary being cautious about sharing personal data online or with third parties while using strong passwords across all financial accounts, you can significantly reduce the risk of credit fraud or theft. Remember, your credit score is a valuable asset that can impact your financial future, so it's crucial to take the necessary steps to keep it safe.

What is a good credit score?

When it comes to credit scores, one question that often arises is, "What is a good credit score?" Well, my friend, let me enlighten you. A good credit score is like having a golden ticket to the financial world. It's an indicator of your trustworthiness and overall financial health.

Lenders and creditors use this three-digit number to determine whether they should lend you money or extend credit to you. So, what range falls under the category of a good credit score?

Typically, credit scores range from 300 to 850. A good credit score generally falls in the range of 670 to 739.

This suggests that you are a responsible borrower who pays their bills on time and manages their debts well. With a good credit score, doors open wide for opportunities like getting approved for loans with favorable interest rates or securing that dream apartment without any hassle.

On the other hand, if your credit score falls below this range, it may be considered fair or even poor. A fair credit score typically ranges from 580 to 669 while anything below 580 is considered poor.

Now don't fret if your current situation doesn't fall into the "good" category; it doesn't mean all hope is lost! It's important to note that different lenders may have varying criteria for what they consider as a good credit score based on their risk appetite and lending policies.

However, generally speaking, aiming for a higher credit score will always benefit you in terms of financial opportunities and peace of mind.

How can I improve my credit score?

person at laptop looking at calendar with due dates

The most important way to improve your credit score is to pay your bills on time. Late payments have a significant negative impact on your credit scores.

You can set up calendar reminders or automatic payments to ensure you never miss a due date. By consistently paying your bills on time, you demonstrate responsibility and reliability to potential lenders.

Another strategy to improve your credit scores is reducing the amount of debt you owe. Aim to keep your credit utilization ratio below 30%.

This ratio represents the percentage of available credit that you're using at any given time. Lowering this ratio shows lenders that you are not overly reliant on borrowed funds and are managing your finances responsibly.

Additionally, it's crucial to diversify your credit mix. Having different types of accounts such as credit cards, loans (like car or student loans), and even a mortgage can positively impact your scores.

Lenders like to see that individuals can handle various types of debt responsibly. Avoid closing old accounts unless absolutely necessary. Length of credit history also plays a role in determining creditworthiness; therefore, maintaining longstanding accounts demonstrates stability and reliability as a borrower. Remember that building good credit takes time; there are no quick fixes or shortcuts.

Alliance America can help

Alliance America is an insurance and financial services company dedicated to the art of personal financial planning. Our financial professionals can assist you in maximizing your retirement resources and achieving your future goals. We have access to an array of products and services, all focused on helping you enjoy the retirement lifestyle you want and deserve. You can request a no-cost, no-obligation consultation by calling (833) 219-6884 today.

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