Ummm… my kids don’t have any credit. What are you talking about?
Freezing your kid’s credit is much more important than most parents realize. Here in the U.S. a person’s credit score is the major factor in many financial dealings. Your credit score determines if you can buy a home, get a credit card or a car loan, and in some cases can even be a factor in getting a job. Normally, we develop a credit score by paying bills and taking on loans as we enter adulthood. There are lots of good arguments for and against the current credit system, but it is what we have and so it is important to understand how the system works and how to protect yourself.
OK, but what does that have to do with my kids?
Stolen identity information is used to apply for loans/credit cards. Stolen information may also be used to defraud an employer. Sometimes to avoid immigration and work permit regulations. Sometimes for other more nefarious reasons. In the past, no credit history was a liability when applying for new credit. More recently most creditors have few if any concerns if someone lacks a credit history. So an identity with no credit history, and one that is likely not going to be checked on for many years, is a perfect target for identity thieves. In fact, Social Security numbers from infants are some of the most valuable stolen identity information sold on the dark web.
Criminals combine stolen Social Security numbers with other stolen information. A stollen Social Security number is combined with a stolen name and address to create a realistic but fake identities. These identities are then used to apply for credit. The criminal may apply for credit cards, take out loans, and even apply for government benefits. A credit check run on the fake identity will show that the “person” has no bad credit history.
When the real owner of the Social Security number starts to apply for credit they discover a long history of bad debt. This can be difficult and costly to clean up. It can take years to recover your good credit and even then the bad records can come back to haunt you again and again.
Some victims of identity theft have petitioned for a new Social Security number. But even in the worst instances of identity fraud, the Social Security Administration is very resistant to issuing a new Social Security number.
That all sounds horrible. Will freezing my kid’s credit really protect them?
Mostly. Freezing your child’s credit will prevent anyone from opening new lines of credit. It will also make the frozen identity less attractive to criminals. For adults who may be actively using your credit to apply for loans freezing your credit can be an inconvenience. But for kids it should be a non-issue. So there is very little downside.
Alright. I’m convinced. But what about my credit?
Freezing your own credit is a good idea as well. Any minor inconvenience from freezing your credit pales in comparison to the effort required to recover from identity theft.
Freezing your credit will not affect your ability to use your current credit cards or access funds on existing lines of credit. If you have an existing mortgage or car loan the existing loan will not be affected. If you want to take out a new loan, refinance an existing loan, get a new credit card, or request an increase in a current line of credit you will have to unfreeze your credit first. unfreezing your credit usually requires just a quick call to the credit bureau. In some cases you can freeze/unfreeze your credit online from your cell phone.
If you are house hunting or looking for a new car you can unfreeze your credit while you are shopping and then turn the freeze back on. Having your credit exposed for a short time will still make it much less likely you are victimized than if your credit is open for long periods of time when you are not necessarily paying close attention to it. Many cases of identity theft go undetected for months or years.
How to freeze your credit
The major credit reporting agencies have made it very easy to freeze your credit. It is best to freeze your credit at all three of the major credit bureaus. All three offer an online option, but generally it is easier to do this over the phone. So set aside an hour and have at it!