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Online Credit Services

Disadvantages of
Online Credit Services -
Internet Security

Online credit services may seem like a convenient way to obtain financing, but can prove devastating to your finances and your identity if you do not take proper precautions. The internet provides two primary benefits to the perpetrator of financial and identity theft crimes: access and anonymity. The internet enables a thief or shady operator to anonymously contact thousands of individuals using multiple access methods such as email lists, free for all (FFA) pages and spyware with blinding speed, acquire personal or financial information, and just as rapidly disappear. The task of the internet thief is made easier by the fact that most internet users are unaware of the security risks inherent in an internet connection and are often gullible when it comes to believing the claims made by internet charlatans.

Security flaws permeate the entire infrastructure of online communication, from your personal computer to the largest corporate websites and the interconnections that define the Internet or worldwide web. These flaws are largely software- and communication-based, although hardware can on rare occasions be compromised. Many flaws or vulnerabilities present themselves by virtue of the complexity of operating systems, the simplicity of communications protocols, the failure to periodically perform software updates, and the propensity of internet users to utilize anonymously-sourced free and pirated software.

Financial houses such as banks, lenders and brokerages and government, defense and security agencies and firms all take great pains to insure that their systems are highly secure. But weak links in communications can compromise the most secure systems, as a major security firm recently discovered through absolutely no fault of its own. Internet hackers invaded an internet node (communications hub) that fed into the company’s secure system, modified addresses to divert company traffic, established a fictitious shadow copy website (an internet practice known as spoofing) that mimicked the company’s actual website, then defaced that website to make it appear that the security company had been hacked. In fact, nothing of the sort had happened; the company’s systems were secure. But their communication channels were vulnerable to attack. While it is doubtful that the hackers could in this case obtain confidential information because such information was encrypted, the point of the attack was to damage the company’s reputation.

While this is an extreme case, it serves to point out that every system has its weaknesses. When vulnerabilities are exascerbated by lax security precautions, poorly-designed software and lack of knowledge by consumers regarding the danger and procedures necessary to properly secure systems, they can be exploited by hackers and thieves with maximum effect. Typically, these individuals target the weakest and easiest points of attack. Guess which targets are most vulnerable. If you ventured to guess that you, the consumer, and your computer are most likely to be targeted, you are correct.

If you feel you are performing your day-to-day internet transactions in a diligent manner without risk of compromise, ask yourself the following questions:
  • Do I ever respond to emails that promise fantastic opportunites such as, “Get rich working at home!” or “Mortgage rates as low as 1.5%”?
  • Have I ever clicked a link in an email from an unfamiliar source because I was curious?
  • Do I open email attachments without first scanning them for viruses?
  • Do I trust that email attachments from my friends are virus-free?
  • Have I ever sent my username and password to a friend in an email?
  • Do I frequently surf numerous unknown websites?
  • Do I download free software without properly investigating its source, relying on the issuer to be honest and competent?
  • Do I install software appliances such as toolbars because they come from sources that appear reliable?
  • Do I use pirated software?
  • Do I utilize an always on cable connection to the internet?
  • Do I always check to insure that I am on a secure connection (SSL or equivalent) before filling out internet forms containing personal information? If the connection is not secure, do I refuse to provide the information?
  • Does my ISP utilize a filtering mechanism to screen out spam?
  • Do I run the latest version of my computer operating system and regularly check for and install security updates and patches?
  • Have I installed antivirus software and is its database of virus definitions up-to-date?
  • Do I routinely scan my computer for viruses or is my antivirus software set to do this automatically (at a time when the computer is running)?
  • Is my antivirus software capable of scanning incoming email?
  • Have I installed a software package capable of detecting and removing spyware?
  • Have I installed firewall protection and do I know how to properly configure it?
  • Do I ever disable my firewall so that I can perform a download or play an interactive game?
  • Do I have a hardware firewall?
I’ll bet I caught you on at least one of the above security issues. It is nearly impossible not to place yourself and your personal information at some degree of risk when using the internet. Knowing the dangers and taking steps to curb them will go a long way toward reducing that risk. Unless you refuse to connect your computer to the internet, you cannot avoid doing internet business, nor should you. The internet is a powerful productivity tool. To protect yourself on the internet, use common sense, avoid being gullible by refusing to jump at exceptionally generous offers or respond to unknown solicitors, and do the following:
  1. Never, EVER, respond to ANY email solicitation for any sort of financial transaction. The majority of email solicitations are bulk mailings of a highly dubious nature. Some of these simply seek to confirm that your email address is active by attempting to gain a response from you, after which your address will be sold to other email solicitors. Others are more sinister phishing expeditions. Phishing is a tactic whereby you are coerced into providing personal information which may then be sold to other lenders or used for the purpose of identity theft.
  2. If you receive an email from a known institution or one with which you routinely do business that solicits financial or personal information, you should call the institution or log on to your account THROUGH THEIR WEBSITE. DO NOT use any link within the email, which could link to a false website. Find out whether the financial institution has actually solicited this information and report the suspicious activity to them if they have not. NO BONA FIDE FINANCIAL INSTITUTION WILL EVER SOLICIT PERSONAL INFORMATION THROUGH AN EMAIL LINK; they will instead ask you to go to their website independently to complete the transaction.
  3. Read Privacy:  Tips for Protecting Your Personal Information from the Federal Trade Commission. This is a must-read article that will help you safeguard your personal information.
  4. At a minimum, invest in a good spyware blocker to help secure personal financial information on your computer. A firewall is also a good idea, but start with a spyware blocker to help prevent keystroke logging, a method by which information you enter into your computer can be transmitted to a remote location without your knowledge. We use Spybot Search & Destroy, an absolutely free spyware blocker which just happens to be one of the best available, and update it regularly. If you choose this spyware blocker, additionally install the TeaTimer resident program, which will constantly monitor your computer and alert you to any unauthorized spyware-related activity.
  5. Insure that any lender or financial institution with which you choose to make inquiry or do business either has a brick-and-mortar location (physical office with real address and phone number, not a postal drop or answering service) or is VERY WELL KNOWN. Check with the Better Business Bureau® to determine whether the financial institution is legitimate and whether they have any complaints lodged against them. It is a good idea to choose a licensed institution with an established history who belongs to one or more lending associations and can provide verifiable references. Avoid offshore institutions; if anything goes wrong, you may have no recourse.

Advantages of Online Credit Services

Provided that you take proper precautions to safeguard your personal and financial information and choose a good online financial institution, online credit services can have significant advantages. Convenience is perhaps the biggest advantage. There is no shortage of online lenders and brokers on the internet today, all competing for your business, as well as many consumer information sites seeking to counsel consumers about online credit services and many other consumer issues. This wealth of information makes it relatively easy to gain an understanding of the procedures involved in procuring online credit and become an educated consumer if you have the motivation to do so.

Once you have learned what to look for and look out for with regard to the type of online credit service you are seeking, you can shop around among the plethora of online lenders and brokers to identify the company you feel best suits your needs. Doing so on the internet is far easier than driving around town to speak with different loan officers or hanging on the phone for hours waiting for the next service representative. However, do not rely solely on your internet connection for all lending information. As you narrow down the playing field, it is a good idea to call the online lenders you are contemplating and asking them some questions. Akin to an interview process, this gives you a feel for how knowledgeable and responsive their employees are, which may in turn provide some insight into what kind of service you can expect after the transaction is complete or if a problem occurs.

Brokers and large internet financiers may be able to offer you more competitive rates than your local bank, savings and loan or credit union. Take full advantage of this competitive environment; do not accept the first offer that meets your minimum criteria. Keep in mind that purely online lenders are not the only players; all major lending institutions and many smaller ones have an online presence. Don’t overlook the fact that your local bank may offer online credit services or at least may provide online information sources which can help you choose more wisely. Do not simply choose the lending institution that offers the lowest rate, fewest fees (Always be on the lookout for hidden fees.), fastest service or asks the fewest questions. Your choice should be well thought out and encompass those aspects of pricing and performance most relevant to your current and expected future financial situations.

After a transaction has been agreed to, you may be able to access your account information online and may even be able to make payments online through a secure server. Some financial institutions will charge extra for this convenience while others consider online account access and bill paying to be an integral part of their business model. If online account access or online bill paying are important to you, be certain before you close the transaction that you are not going to be charged for these services. Such ongoing fees can add up quickly, and may negate savings you may have otherwise accrued.

In summary, a variety of online lenders makes the selection of online credit a viable alternative to more conventional forms of credit procurement, but a great deal of diligence is required to insure that your personal and financial information is not compromised. When selecting an online credit service, two things should be paramount — know the company you are doing business with and be comfortable with the credit solution they are proposing. If either of these conditions cannot be met, you should look elsewhere.

Finally, a note of caution is necessary regarding shopping around for credit services, especially when doing so online or through a broker. Be aware that multiple or frequent credit inquiries can reduce your credit rating, resulting in a less than optimal mortgage solution. If you must talk to multiple lenders, you may want to take steps to insure that pulls of your credit records are kept to an absolute minimum.

Authored by Kenneth L. Anderson.  Original article published 5 May 2005, updated 23 February 2006.

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