How to Safeguard Your Children's Credit

Offering an unvarnished credit history to identity thieves is like offering a clean bill of health to someone suffering from a chronic illness -- it's far too tempting to turn down.

Unfortunately that unvarnished credit history can come from a source you wouldn't normally expect -- like your child. And, according to the Identity Theft Resource Center, child identity theft happens more often than many people think:

In their 2010 report, the Federal Trade Commission reported that 8 percent of total complaints received involved someone 19-years-old and under. In a recent 2011 Carnegie Mellon CyLab Report, children were reported to be 51 times more likely to become victims of identity than adults.

The minute your child is awarded a Social Security number, they are at risk of having their credit compromised by crooks who can easily open a credit card or line of credit in their name. While we carry the same risk as adults, this act of identity theft can be even more damaging simply because it could be 18-plus years before your child pulls their credit and notices the fraudulent activity.

Luckily, there are ways you can protect your child's credit and ensure it's squeaky clean before they begin managing it responsibly at the age of 18.

Here's What to Look For

According to the Federal Trade Commission, there are several signs that can point to child identity theft.

You or your child might:

  • be turned down for government benefits because benefits are being paid to another account using your child's Social Security number
  • get a notice from the IRS saying the child didn't pay income taxes, or that the child's Social Security number was used on another tax return
  • get collection calls or bills for products or services you didn't receive

Other signs to be aware of include if your child receives offers from various credit card companies or financial institutions, or if they are denied a bank account because of their credit history.

By noticing these red flags, you can take steps to remedy the situation before your child reaches an age where a clean credit history is important.

Check Your Child's Credit Report

If you suspect your child may already have been a victim, or you simply want to prevent it from happening in the future, make sure your child hasn't already been the victim of credit fraud by pulling their credit report.

The three credit reporting agencies (Equifax, TransUnion, Experian) don't keep credit reports on a children younger than 13. So if your child does have a credit report, they likely have already been the victim of credit fraud.

In order to determine if fraud has occurred, you must request that each of the agencies search their database for credit information in your child's name. Each agency has different requirements before releasing the information -- TransUnion has an online form, Equifax requires copies of various documents showing your paternity as well as a letter of explanation, and Experian also requires various documents and letter of explanation for parents of minors under the age of 13, while children 14 and older can request a report themselves online.

Check The Laws Your State Has In Place

Starting with Maryland in 2012, many states have begun enacting laws that allow parents to request a credit freeze from all three credit reporting agencies (Equifax, TransUnion, Experian). This prevents identity thieves from ever using your child's social security number to establish credit.

Other states allow you to freeze your child's credit report. Obviously this is considered less effective because the existence of a credit report means someone has already attempted to establish credit in their name.

Do a little research, find out if your state has any credit protection laws in place for your child, and take advantage of what is offered.

Keep Documents Safe

Without recognizing the threat of child identity theft, we might not be as apt to protect our children's identity as we are our own. The reality is, even sharing certain pieces of information on things like school forms can put them at risk.

Make sure you understand exactly what information you are required to give and who will have access to it. Keep all documents with things like Social Security numbers in a safe, secure place, and take added precautions if your child's school experiences a data breach.

This increased awareness can save your child from having to repair their credit before they are even able to establish it on their own.