Protecting children is a constant responsibility for parents and guardians alike, and many are unaware that they also need to be protected from identity theft.
Identity thieves often apply for government benefits, open bank and credit card accounts, and apply for a loan in the name of the victim, even a child. They often do this long before the child is old enough to open a credit card themselves, destroying a child’s credit history.
If your child is getting mail such as bills for products they didn’t receive, an IRS notice that income taxes haven’t been paid, or you or your child are turned down for government benefits because the benefits are being paid to another account linked to your child’s Social Security Number, then they may be the victim of identity theft.
To protect them, make sure you’re not carrying around their birth certificate or Social Security Card. Keep these locked in a fire-proof safe at home and have your home computer updated with virus protection software.
Also, be cautious about who you give your child’s identifying details to. Ask why the information is needed before giving it out. Ask if you can use a different identifier, or use only the last four digits of your child’s Social Security Number.
Your child shouldn’t have a credit history at all before age 14, so any signs of credit history could mean fraud. Check with the three main nationwide credit reporting companies to make sure a credit history doesn’t come up. You can also get a report every 12 months from annualcreditreport.com.
One misconception about helping a child build credit is to open a credit card in their name and pay it off on time for years. Called “piggybacking,” this practice was eliminated in 2007 by the three major credit bureaus because it was being exploited by people looking to boost their credit scores.
A credit card account can’t be opened for a young child, such as age 5 – 10, as a way to build their credit history early. This could open the door to identity theft, and creating a credit file could give a family member or stranger a chance to steal the child’s credit identity.
Adding a young child to a parent’s credit card account as an authorized user is also a bad idea. A clean credit history—meaning no use of credit at all—is best for a child when they do get a credit card someday.
What you may want to do—if you’re comfortable with it—is add your child at age 15 or so as an authorized user to your credit card, as this can boost their credit score if you have a good credit record.
Make sure they understand how a credit card works, and keep tabs on their charging activity. You can also add them as a user while not allowing them to use the card, or to only use it when you’re shopping with them.