Protecting Your Child’s Financial Future: Why Credit Freezing is Crucial
Most parents would go to great lengths to protect their children. But many overlook a simple yet powerful way to safeguard their kids’ financial security: freezing their credit. This step can be especially important in the wake of recent widespread data breaches, where millions of Americans’ Social Security numbers are being sold on the dark web. While credit freezing won’t completely eliminate cybersecurity risks related to stolen Social Security numbers, it’s a crucial extra layer of protection that parents can implement.
Key Takeaways:
- Identity theft against children is on the rise, with children under 19 accounting for 3% of all identity theft reports in the first half of 2024.
- Credit freezing involves contacting the three major credit bureaus – Experian, Equifax, and TransUnion – and providing documentation to lock a child’s credit report, preventing the issuance of loans or credit cards.
- This proactive measure can shield children from financial harm caused by identity theft, even if there’s no immediate indication of compromise.
- Parents should educate their children about protecting personal information early on and consider credit or identity theft monitoring services for added security.
The Growing Threat of Child Identity Theft
Identity theft targeting children, particularly young children, often goes unnoticed until they reach their teenage years or early adulthood when they apply for credit or loans. This delayed discovery can have devastating consequences.
According to data from the Federal Trade Commission (FTC), identity theft reports involving children under 19 have been steadily climbing, rising from 2% of all reports between 2021 and 2023 to 3% in the first half of 2024.
Thieves can use a child’s personal information, including their Social Security number, name, address, and date of birth, to fraudulently:
- Apply for government benefits like healthcare coverage or nutrition assistance.
- Open bank or credit card accounts.
- Apply for loans.
- Sign up for utility services.
- Rent a place to live.
The Importance of Proactive Credit Freezing
While credit freezing won’t prevent all forms of identity theft, it’s a vital step in protecting children from financial harm. Kim Cole, community engagement manager at Navicore Solutions, a nonprofit credit and housing counseling agency, emphasizes the long-term impact of child identity theft: "It can take years to discover a problem, and the damage can continue to grow."
Loretta Roney, president and chief executive of InCharge Debt Solutions, a nonprofit provider of credit counseling, highlights a real-life example: "A friend’s uncle had destroyed his credit and started using his niece’s name and Social Security number to open credit cards and max them out. It took four years for the young woman to discover the fraud."
Steps to Protect Your Child’s Credit
1. Check for Existing Credit Reports:
Before freezing your child’s credit, it’s essential to check with each of the three major credit bureaus to see if a report exists. This is usually only the case if someone has fraudulently opened credit in the child’s name or if the child has been added as an authorized user on an adult’s credit card.
You can request a credit report for your child by sending a letter with required documentation to each credit bureau.
2. Freeze Your Child’s Credit:
If your child has no existing credit report, the next step is to freeze their credit. This is a straightforward process, but it does require contacting each of the three credit bureaus individually and providing specific documentation.
3. Keep Records for Future Unlocking:
When you freeze your child’s credit, you’ll receive a PIN number that allows you to temporarily unlock the freeze. This is essential when your child turns 18 and needs to apply for credit. The unlocking process can take some time, and it’s essential to follow the specific instructions provided by each credit bureau.
4. Educate Your Children on Personal Information Protection:
Start talking to your children early about the importance of safeguarding their personal information. Teach them to be cautious about sharing sensitive data online and to protect their Social Security number.
5. Consider Credit or Identity Theft Monitoring Services:
Parents can choose from a range of credit or identity theft monitoring services for added security. Some basic services are offered for free, but comprehensive family plans often involve fees. These services may provide additional protection, like identity theft insurance and fraud resolution services, and parents should carefully consider the benefits and associated costs.
Conclusion
Protecting your child’s financial future begins with taking proactive steps like credit freezing. By understanding the risks of child identity theft and implementing these preventative measures, you can give your children a strong financial foundation for the future. Remember that continuous vigilance and open communication about personal information are crucial to mitigating this growing threat.