How to Protect Your Child's Credit against Fraud in the Future
Unfortunately, credit fraud is a real issue. Hackers gained access to Equifax, one of the three major consumer credit reporting companies, in 2017. As a result, the sensitive information of 143 million American consumers, including their Social Security numbers, was compromised. This was not an isolated instance. Major businesses, restaurants, and hotels such as Macy's, Marriott, Adidas, Saks Fifth Avenue, and Planet Hollywood have also experienced significant data breaches, exposing their customers' personal information.
Adult consumers, on the other hand, agree to assume a certain amount of risk with their personal information. They apply for and utilize credit cards. For bank loans and car loans, they provide their Social Security number. What about a child, though? They don't do any of these things. As a result, as a parent, you may be taken off guard if your child graduates from high school and you learn they've already bought a car or rented an apartment. Or, at the very least, someone used your child's name and Social Security number. We're talking about financial exploitation of youngsters. The most typical types are new bank and credit card accounts.
According to Forbes, they are so ubiquitous that they can go unnoticed for years. Identity thieves can use a child's Social Security number to apply for credit, and government benefits, rent apartments, and establish utilities. The effects become increasingly complicated over time. When your child reaches maturity and wants to apply for jobs, first credit cards, or vehicle and school loans, they may already have a lengthy credit report that needs to be cleaned up.
How to Avoid Credit Card Fraud Against Children
So, what should a parent do? One option is to freeze your child's credit as soon as possible. A credit freeze will not completely prevent this type of identity fraud, but it is the most effective form of prevention available and can save your family a lot of time and effort in reporting and clearing it up. According to Syed Ejaz, assistant policy analyst at Consumer Reports, "freezing a Social Security number" is the same as "freezing credit."
"There are no disadvantages to freezing your child's credit," Ejaz writes in an email. "Consumers who have frozen their credit will need to temporarily unfreeze it when applying for new credit accounts," according to the FTC. "Parents should keep this in mind while helping their child apply for school loans and other credit products." This effectively prevents the opening of new loans or lines of credit. Children over the age of 16 can request a credit freeze for themselves, while children under the age of 16 must have a legal representative submit the request on their behalf. Credit freezes became free as a result of legislation that went into effect in September 2018, and the law also required that the freeze be available to children. This is a crucial difference to make because children are the most vulnerable to identity theft.
Other Ways to Safeguard Your Child's Credit
There are further things you may do to assist protect your child's credit. You can consider a credit lock instead of freezing your child's credit. According to Consumer Reports, while a credit freeze is free, credit bureaus all provide credit locks, but they are not necessarily free. Credit locks, on the other hand, may be more handy than credit freezes because a freeze, for example, is intended to be a long-term solution safeguarding credit for a child's entire adolescence, whereas credit locks may be swiftly and simply turned off and on, some using an app.
A credit freeze also provides legal protection under federal law that credit locks do not. And, if the freeze fails or is still circumvented by a criminal, your child will be shielded from financial liability for the credit fraud. Aside from credit freezes and locks, you should be cautious about how and where you reveal your child's personal information during their adolescence. You can't resist sending it to their schools, doctors, or financial institutions to some extent. However, go the extra mile to guarantee that these companies are only using the information as needed. This includes reviewing all privacy notifications they offer, storing all relevant information in a secure area, and shredding copies of papers you no longer require.
If your child's school, doctor's office, or other business alerts you of a data breach, check your child's credit reports and report any suspicious behavior to the Federal Trade Commission. Run a credit check on your child when he or she approaches the age of 16. This will notify you if there are any bogus accounts or inaccuracies, as well as allow you time to clean up the record, which frequently necessitates a significant amount of documentation. Again, a credit freeze isn't perfect, but it's probably the simplest and most effective approach to keep your child's credit record clean.