Posted on: 26 May 2016
Most consumers understand how their credit score affects their access to things like loans, insurance, and apartment rentals. However, what many consumers don't understand is the risk facing minors. When you don't monitor your child's credit history, he or she is at risk of identity theft and the potential for a host of negative accounts. When this happens, it can mean years of struggling to restore their good standing even though they weren't the ones who damaged it. Understanding how to protect your child and spot problems early can make a big difference in your child's long-term financial stability.
What Makes Children Such a Target?
Because kids have no credit history, their Social Security numbers are often some of the easiest to get approved for financing. When paired with the fact that most parents don't understand this risk and don't watch their child's credit, it means that nobody will notice the fraudulent accounts right away. By the time the issues are recognized, the damage has been done and can be extensive. Sometimes, the damage is extensive enough to require a bankruptcy filing to resolve it.
How Can You Protect Your Child's Good Standing?
There are no established systems to automatically track your child's credit history, so it's up to you to handle it. You are the primary line of defense in this case until your child is old enough to do it on their own. You can work with a credit monitoring service for some support, but there are other things you should do as well.
Reach out to each credit bureau every year for copies of your child's credit reports. Every consumer is entitled to a copy once a year. If the response from the bureau is that there is no file found, that's good news. That means that there are no credit accounts open under your child's Social Security Number.
What Should You Watch For?
Although some instances of identity theft come with no warning signs at all, there are a few things that you can keep an eye out for. For example, if you start receiving offers in the mail for credit cards or lines of credit in your child's name, that's a sign that there's an active credit file on your child.
Another warning sign doesn't come until your child is much older. If he or she applies for a loan to buy that first car or for college, a denial for outstanding negative accounts likely means that someone has stolen your child's Social Security number.
What Can You Do About These Credit Issues?
You have to be proactive about taking care of any potential credit issues in your child's name. The very first thing you should do is file a report with your local police department. This provides you with an official record of the identity theft and provides you with a police report that you can send to the creditors and the credit bureaus.
Forward that report to each creditor with a demand for account closure. In addition, you can reach out to the credit bureaus to have a fraud alert placed on your child's credit reports. The fraud alert prevents any future applications for credit from being approved without complete verification of the applicant's identity. Write down every step that you take, including the names of every person you speak with and the dates of those phone calls.
In extreme cases, your child may even be facing bankruptcy by the time they are 18 years old due to this type of identity theft. If you're concerned, reach out to a bankruptcy attorney right away to talk through the situation. He or she can offer guidance about how to proceed, including tips for ways to avoid that bankruptcy filing.
For more information, contact a company like Morrison & Murff.Share