According to Yahoo's preliminary analysis, it does not appear as if the data was dumped from Yahoo servers directly. The company assumes that the data has been collected from third-party databases instead.
The attack used a list of username and password combinations to try and gain access to Yahoo Mail accounts.
It appears that the information the attackers were after were names and email addresses of the most recent sent emails from affected accounts.
Yahoo has reset email passwords of affected accounts as a consequence, and is using sign-in verification to enable affected users to secure their accounts.
The password is the most important part of the equation. If it is weak, it can be easily guessed or brute-forced. Weak in this case means that it has a low character count, may include a dictionary word or names, and does not use general password security suggestions:
You can change your Yahoo Mail password under Settings > Accounts > change password. To get to the settings, click on the menu button next to your username in the top right corner of the Yahoo Mail website.
Once you have set a secure password, you may want to explore additional security options that are provided by Yahoo.
You can for instance set up sign-in verification for your account on this page.
Sign-in verification adds a second layer of protection to your account. Even if a hacker or thief manages to get your account password, access is only granted if the second-sign in verification code is also known to them.
Note: This works only if you link a mobile device capable of receiving SMS to your account.
Sign-in verification kicks in whenever Yahoo recognizes a login attempt from a device or location that is unknown to the service (meaning that it was not used before).
To set up sign-in verification, do the following:
Additional information about setting up Second sign-in verification on Yahoo are available on Yahoo's help pages.
Note: If you have set up the feature, you may need to create so called app passwords for select applications and devices, as not all may support sign-in verification.
You can create a sign-in seal which is displayed to you during sign in. The idea here is that it will allow you to spot fake Yahoo sign in forms as the custom image or text that you have selected won't be displayed on those. It protects against phishing attacks mostly though.
The recent login activity page can also be useful. You can check and see the locations and devices used to sign in to your Yahoo account. If you spot a sign in from a location you never been to for instance, you should change your account password immediately.
You may also want to check the app and website connections page regularly. This page lists all apps or websites that you have linked to your account. You find the permissions that these apps have listed underneath each app. It is recommended to remove any app or website that you do not use anymore from here by clicking on the remove link next to it.
Those are just the precautionary measures that you can do on Yahoo directly. It goes without saying that you should also take care of your system's security by installing proper antivirus software, using a firewall, and common sense when on the Internet.
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