When it comes to criminal danger, the safety of children is given top priority. When it comes to financial crime, children are often an afterthought—if they’re given any attention at all.
But the fact is, children are just as vulnerable to identity theft as adults. In many cases, scammers will specifically target children because no one is paying attention to their credit. If allowed to go on long enough, this can potentially ruin an otherwise promising financial future.
If you’ve never thought about protecting your child’s credit, now is the time to start. Read below to learn how to do that, and what can happen if you don’t.
Why you should care about your child’s credit
A friend of mine once went to buy an engagement ring for his girlfriend. He couldn’t afford to pay cash for the ring, so the jeweler told him he could finance the purchase. When the store ran his credit, they denied him because of multiple default loans.
That’s how he discovered an identity theft that began when he was a child. It took several months to straighten out the matter, and he never learned who stole his identity or how it happened in the first place.
A bad credit score can preclude your child from qualifying for their first apartment, a utility service, or even student loans.
Getting ahead in life is a lot easier when you have a strong start, and much more difficult when you have something—like poor credit—holding you back from the get-go. Given the massive student loan burdens most young people face today, entering adulthood with shoddy credit is a recipe for frustration and failure.
How to protect your child’s credit
Avoid giving out personal information
The easiest way to avoid identity theft is to never disclose personal information about your child or your family. Anyone who knows your kid’s social security number and other identifying information can open up credit accounts in their name.
Never write down your child’s social security number unless it’s absolutely necessary. Most businesses and services, like a pediatrician’s office, shouldn’t need a social security number. The fewer places that have that kind of information, the less likely it is that your kid’s identity will end up in the wrong hands.
Freeze their credit
A credit freeze takes away the ability for anyone to run a credit check on your social security number. It also prevents lenders from opening new accounts in your name.
Before placing a freeze, check your child’s credit report through each of the three credit bureaus—Experian, Equifax, and TransUnion. If your child has a credit report, it likely means that someone has used their social security number to open an account. Go through the report and call any lenders to let them know the account belongs to a minor.
You might have to send a copy of their birth certificate to prove they’re under 18, as well as some other supporting documents. Placing a freeze on your child’s account is similar to doing one for your own, but you’ll have to prove that you have legal guardianship.
Once your child is ready to start building his or her credit, you can unfreeze or thaw their credit.
Review their credit report
Parents who don’t want to freeze their child’s credit can also sign up for a monitoring service, like the one offered by TransUnion. The credit bureau watches your credit report and notifies you if any new items appear. Even though the service is offered by TransUnion, it watches all three credit bureaus.
The service costs $9.95 a month and includes one-click credit freezing, instant alerts and educational tools. Once your child is old enough, you can show them how you monitor their credit and explain the benefits of doing so.
To learn more, read our full review of TransUnion’s credit monitoring service.
Set up annual alerts
If you don’t have a freeze set up for your child, review their credit report on a regular basis. Until they’re old enough to start checking their credit themselves, it’s up to you to make sure no one is jeopardizing your child’s financial future.
Make an appointment in your calendar to check the credit report once a year for all three credit bureaus.
Plus, you can view their credit report for free through sites like Credit Sesame.
Teach them how to build credit
As a parent, you have an opportunity to help your child build a stable credit history. You can add them as an authorized user on your own credit cards. If you use your cards responsibly, your habits will rub off on their credit. Remember to ask your credit card provider if they report card usage on an authorized user’s credit report. If they don’t, this strategy is essentially useless.
If your child is 21 or older and has his or her own income, they can open a secured credit card, which requires a deposit to activate. A secured card is designed for people with poor credit or no history at all, so it’s perfect for a college senior about to enter the real world. A great secured card is the Discover it® Secured.
Show your child the basics of building credit, like paying your bills on time every month and trying to pay the balance in full. The best way to teach is by setting a good example, so use this as an opportunity to develop healthy financial habits.
Adults aren’t the only people affected by identity theft. Your child could be a victim of identity theft, so it’s important to monitor their credit just like you do yours. And don’t forget to start teaching them good money habits as early as possible!
- Budgeting For Teens—Grow Your Money While You’re Young
- How To Save Money As A Teen