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Have you ever gotten a letter from a debt collector trying to collect on a loan that they say your child owes? Or maybe your child has been getting offers for preapproved credit. That sort of thing may be a sign that someone else has taken out credit in your child’s name.
Unscrupulous people, even relatives, could take out loans using a child’s personal information. Although children generally cannot legally enter into contracts and take out loans, these sorts of incidents mean their credit could actually be tarnished by the time they are of age to pursue credit.
That means when your child reaches adulthood and wants to take out a loan, they won’t be able to reap the benefits, such as the lower interest rate on loans that a good credit score yields. This is why you might want to consider freezing your child’s credit.
Children are easy prey for fraud
Children, particularly those in foster care, are especially susceptible to misuse of their personal information. Fraudsters will use a child’s personal information, such as their name, address, Social Security number or date of birth, to get loans in the child’s name. They may use that information to access government benefits, rent a place or open a credit card account.
Credit reports have even been known to contain loans that date before a child’s birth, which is not even possible. And credit reporting agencies can be unhelpful when consumers report bad input on their credit reports.
If you find out that your child’s information is compromised, report the identity theft to the Federal Trade Commission and your local police. Also, get in touch with the companies that extended credit and close down the accounts. Ask for written confirmation that your child is not responsible for the accounts. The Fair Credit Reporting Act requires the credit reporting bureaus, if you provide them proof, to get any compromised input off your child’s account.
What parents can do to protect children’s information
Knowing that your child’s personal information could be compromised, you could also take steps to be vigilant and prevent this from happening. For instance:
- Don’t give out your child’s sensitive information, such as their Social Security number, unless it is essential.
- Store any documents that contain a child’s sensitive information in a secure way, such as a locked safe in a closet.
- When you want to trash such documents, make sure you have thoroughly cleaned them of the identifying information (such as by shredding them, for example).
- If any of your devices contain your child’s personal information, make sure to cleanse the data before you get rid of the devices.
- Check with the credit reporting bureaus to see if there’s a credit report in your child’s name. Children under age 18 generally do not have a credit report. So if they do have one, it could be a sign that someone else has taken out credit in the child’s name.
How to freeze a child’s credit
Freezing your child’s credit could help you preemptively keep fraudsters at bay. When you contact the three major credit reporting agencies (Equifax, TransUnion and Experian), they would have to create a credit report for your child (if as expected, they have a blank credit slate) and then take action to freeze it.
Once you freeze someone’s credit, no one can access their credit report. Since lenders looking to extend credit will want to look at a prospective borrower’s credit profile, no one else can take out credit in the child’s name. When your child turns 16, they can lift the credit freeze if they want to. If necessary, you could unfreeze their credit before then.
It is free to put in a freeze. You will have to contact each of the three major credit reporting bureaus individually to ask for a credit freeze for your child, who is considered a “protected consumer.” And you will have to provide documents that establish your identity, your child’s identity and your relationship to the minor.
The bottom line
Children start out with a blank credit slate, and fraudsters can take advantage of their pristine record by using a child’s personal information to open financial accounts or get government benefits. One way to prevent this is to freeze your child’s credit.
If you find that your child’s credit is already compromised, you should file a report with the appropriate authorities and also take steps to clean up the tarnished record.