Recently, Equifax, a large credit reporting agency, announced that its computers had been hacked, and personal and financial data of nearly 148 million Americans stolen.
This is an identity theft and is considered the biggest "data breach" in U.S history.
What does all that mean, and is it really as scary as it sounds?
What Is Your Identity?
You are known to your friends by your name -- first name and last name. But there are many people with the same name. So the United States provides each person with a unique Social Security number.
There are secret computers that not only keep every single person's Social Security number, but also the addresses they have lived in, their bank and credit card accounts, any loans they have taken in the past, and so on. This collection of data is known as your Identity, and is collected and maintained by companies known as "Credit Reporting Agencies".
When you, say, want a new credit card or a home loan, the bank has to first verify whether you have paid your bills on time in the past, and so it asks those agencies for a Credit Report about you (with your permission, of course). Once cleared, you can get a credit card, or a home loan.
Losing Your Identity
It is very important for these agencies (as well as banks) to keep data about you very safe and secure. But sometimes, the computers that store this data are "hacked" by some clever and devious computer programmers and the information can fall into wrong hands.
Criminals can then take your Social Security number and other information, and start new accounts in your name - credit cards, cable TV accounts, etc. They can buy things online and not pay for them, but it will be you who will get blamed for not paying your bills. They can even try to get into your online bank accounts and try to change the password. This is called "Identity theft" - where someone has stolen all your information and is now pretending to be you!
How Can We Stay Safe?
While Equifax is investigating what happened, it is up to all of us to take the right steps to protect ourselves from any fraud.
To start with, it is important to have secure and unrecognizable passwords for online accounts (read our earlier article here). Adults should continuously check their credit reports, credit card statements and bank accounts to look for suspicious activity. If there is an issue, they can freeze their credit reports, preventing anyone from creating new accounts. The Credit Agencies will use the help of investigators to track down the thieves.
Consumers should also always use a two-step authentication for their bank accounts - when someone changes the password for their bank account, a text message will be sent to their mobile phone to approve the change. But identity theft can be scary when it happens, and can take years to repair.