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Keeping the bad guys from your online info

With all of the phishing scams, ID theft, stolen credit card files and new security threats like the Heartbleed bug affecting thousands of websites, you can't be too careful about online security.

But even if you're always diligent, it's almost impossible to prevent ID theft from happening. When a business that has your personal information is compromised from within, like in the massive credit card breach at retail giant Target (TGT) that happened during the holidays last year, you're defenseless.

The best you can do is catch any fraud or ID theft early and stop it before it goes undetected for a prolonged amount of time. The best way to do this is to frequently review your credit report information, either yourself or by hiring a service to do it for you. That can spot signs of incorrect information and accounts you didn't open.

Early detection and immediate action is the only way to limit the damage that can be done when your personal information is fraudulently used. The bottom line: You have to take as much interest in your credit report information as the bad guys do.

ID theft prevention

Here are a few things you can do to help detect foul play and reduce the possibility that your personal account info is used fraudulently:

  • Carefully review all activity on your credit card and bank statements, and dispute or report unauthorized activity as soon as it's detected
  • Review your credit reports regularly, looking for changes and any incorrect account information
  • If your credit information has been compromised, ask the three credit bureaus to place a free fraud alert on your credit report file. Unless you qualify for an extended fraud alert, you'll need to renew this every 90 days. A fraud alert notifies lenders that they should take extra steps to confirm your ID, such as calling you at a preset phone number, before issuing new credit.
  • You can also put a lock on your credit report file. A credit freeze (which can be free or can cost about $10 per file, depending on your state) prevents new lenders from accessing your credit report. But be aware that when you do this, it may delay, interfere with or prohibit the timely approval of any request or application for a new loan, additional credit or applications for insurance, employment background checks, cell phones, etc.

Protecting financial accounts

Never log into your financial accounts while connected to a wireless hot spot that's not secure. Using a hot spot in a public area that doesn't require any authentication exposes your computer or mobile device to the risk of being hacked into by thieves who can then access your email accounts.

Make sure to require additional security procedures when you give discretion to your financial firms and advisors over your financial accounts. Require your financial firm to speak with you and request a verbal password (separate from your online password) when transfers are requested from your accounts. Of course, written instructions should also be required in addition to the verbal confirmations.

Finally, never use your email address as your log-on ID for any financial accounts. In some of the fraudulent transfers reported recently, the thief was able to use the victim's email address as the ID and then request a new password to be sent to the victim's compromised email account.

Making these changes may an inconvenience for you and your financial advisor, but if they increase the security of your accounts and prevent even one fraudulent transfer, that will be worth it.

Ray Martin

View all articles by Ray Martin on CBS MoneyWatch»
Ray Martin has been a practicing financial advisor since 1986, providing financial guidance and advice to individuals. He has appeared regularly as a contributor on the CBS Early Show, CBS NewsPath, as a columnist on CBS and on NBC-TV's morning newscast TODAY. He has also appeared on the Oprah Winfrey Show and is the author of two books.

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