Freezing your child’s credit is one of the best ways to ensure he or she does not become the victim of identity theft. Freezing someone’s credit means the credit report is not accessible to third parties who might steal his or her personal information. This action is now available for free in all U.S. states, as a result of the Dodd-Frank law reform. While having frozen credit may not always be convenient for adults, it is extremely useful when protecting children’s identities.
With an increasing amount of data being stored online, identity theft is a huge concern in 2019. Recently, there have been major security breaches within big corporations resulting in stolen data. If your child’s identity is stolen, his or her future could be severally impacted. By creating a credit report and freezing it, you can prevent thieves from stealing your child’s information and ruining his or her credit.
Child Identity Theft
Although identity theft is a risk for anyone, it is a growing issue for children. Children typically have no credit information or history. As such, identity thieves often use their information to set up a new account and open a credit line. Children will then accrue huge debts under their names over several years. Often, it is not until they attempt to open accounts years later that they realize what has happened. By that time, the debt could be hundreds of thousands of dollars or more.
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A 2017 study from the Javelin Strategy and Research found that over one million minors were victims of identity theft. In many cases, the perpetrators were people whom the child knew personally, such as a family member or someone in the community. In addition, dealing with the emotional consequences of these events, a victim of child identity theft may have to spend years trying to regain his or her credit.
Delayed Intervention
One of the reasons child identity theft is so harmful is the same reason why identity thieves find it appealing. Because there is little to no reason to inquire about a child’s credit status, it may be years before parents notice anything is wrong. If your own identity is stolen as an adult, you might quickly notice the effects on your credit score. For a child with no bank accounts to his or her name, there is no way to track these effects. As a result, the impact of identity theft on a child can often be greater than on an adult.
Furthermore, until recently, credit freezes were paid services. Following the increase in data breaches and the danger they pose, legislation now requires credit bureaus to perform freezes at no cost upon request. Although this process can be time-consuming, the fact that this protection is free makes the choice to freeze your child’s credit all the more advisable.
Involving Your Children
When setting up the credit freeze, take the opportunity to speak with your child and educate him or her on what you are doing. If the child is very young, you may need to wait, as he or she may not be able to understand. Older children can benefit from knowing the impact of credit. Moreover, children who are 16 or 17 years of age must request their own credit freezes. This process could be a useful tool in financial and administrative education. It is also important for children to understand the following:
- Financial safety measures, such as the importance of keeping personal information, such as a Social Security number (SSN), private.
- How credit works, and the financial responsibilities he or she might have later in life.
Setting up a Credit Freeze
The first step in setting up a credit freeze is to check whether your child already has a credit report. Most children do not have one unless you have added them to your credit card or have given them their own. If there is a credit report you did not create, report it immediately. If there is no credit report, you must create one in order to have it frozen.
To perform this task, you must submit a separate application to each of the three credit bureaus: Experian, TransUnion and Equifax. Freezing your child’s credit with one bureau does not affect his or her credit report at another bureau.
When checking your child’s credit report for potential fraud, you also need to do so at each bureau separately.
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You can find the forms you need to fill out on each bureau’s website. The next step involves submitting personal information that is required as part of the application process. Once each bureau approves the freeze, you will receive a personal identification number (PIN) that must be used to re-open the credit report.
Potential Risks
Although freezing your child’s credit could prove instrumental in preventing his or her identity from being stolen, there are some risks if you choose to take this route. One of the biggest drawbacks of this method is that you will need the PIN to unfreeze his or her credit. Keeping this information safe for years, until the child is old enough to need his or her own credit, can prove difficult. The documents may be lost, damaged or stolen during this time, especially if you move into a new home. As such, it is important to keep the PIN in a safe, accessible place.
Despite this risk, it is still beneficial to freeze your child’s credit, as the dangers of identity theft can be even greater than the risk mentioned above. By being aware of the potential issues that could arise as you take this route, you are better prepared to avoid them.
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