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Why It’s Smart to Check Your Child’s Credit Report

June 4, 2015
Credit Score, Personal Finance
Why It's Smart to Check Your Child's Credit Report
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With mortgages, car payments and student loans to tend to, checking your child’s credit report probably isn’t on your list of financial priorities. But not knowing about fraudulent activity on a child’s credit report can mean a lot of work to repair the damage.  Several signs usually suggest your child’s credit has been compromised, and you should know what to do if you spot them.

Should there be a credit report at all?

Typically children aren’t the ones racking up debt, so if your child has a credit report before age 18, something fishy may be going on. Credit reports are not inherent to a person’s existence (like a Social Security number or a birth certificate) and are only created when an individual applies for credit. Therefore, if you find out your child has a credit report, it’s usually a sign of identity theft. 

“If you are not aware of an account being opened in your child’s name, you have reason to be concerned,” says Rod Griffin, director of public education at Experian. “You do not have a credit report until a credit account is opened using your identity.”

However, if your child is an authorized user on any of your credit cards, this status will typically open a credit account in his or her name, and that will often generate a credit report.

A person can steal a child’s identity information in several ways. Perhaps it was lifted from a school form, a misplaced tax document. Sometimes, there’s no telling how it was obtained. Criminals typically attempt a handful of actions using a child’s identity, such as:

  • Taking out a mortgage, car loan, credit card, etc.
  • Opening a bank account
  • Procuring certain government benefits (naming the child as a beneficiary)
  • Signing up for a cellphone plan
  • Getting utility service

As a rule of thumb, the Federal Trade Commission recommends checking whether your child has a credit report around the time they turn 16, regardless of any suspicious activity. This provides ample time to correct any errors before they might become a problem.

» MORE: How to Protect Your Child from Identity Theft

Warning signs

Sometimes you might not want to wait before checking your child’s credit report. Receiving suspicious mail or calls tied to your child’s name from collections agencies, utility services, credit card issuers and the like is a common signal that the child’s identity has been compromised.

“If there’s anything that triggers concern, regardless of the age of the child, request a copy of the credit report — it’s free,” Griffin says.

Many people also discover that their child’s identity has been stolen if they’re denied for certain government benefits. Perhaps when putting your child down as a dependent on your taxes, you’ve been notified that their Social Security number has already been used. You might even receive an IRS notice stating that the child has neglected to pay income tax. These are all signs that you must take further action to repair any damage.

It’s safe to say that a person who opens a line of credit with a stolen identity probably isn’t concerned about using the fraudulent account responsibly. This usually results in your child having a tarnished credit report before he or she has even had the opportunity to use credit at all. Having poor credit at an early age can mean being denied student loans, auto loans and credit cards, so it’s important to investigate any indication of fraud right away.

What to do if you suspect identity theft

If you discover suspicious activity on your child’s credit report, follow this process:  

1. First, file a fraud alert by calling any of the credit reporting agencies. Once you’ve filed a fraud alert with one credit bureau, it has to report the alert to the other credit bureaus. This report will help to limit any further damage. Fraud alerts filed with the credit bureaus typically last 90 days. If you need more time to resolve the situation, it’s wise to submit a second fraud alert request.

2. Reach out to the three major credit bureaus directly and have them do a manual search of your child’s records. This can also be done by phone, but will usually require submitting forms with standard documentation from you and your child such as a Social Security card, birth certificate, proof of address or driver’s license. TransUnion, Experian, and Equifax all have their own protocol for initiating this process.

3. If the credit bureaus discover any fraudulent activity, ask them to remove the information tied to your child’s name and Social Security number. You should also contact any individual entities that show up on the report and close out accounts with them, too.

4. Create an identity theft affidavit with the FTC. Once that’s complete, head to your local police station to file a police report with your affidavit in hand. Together you’ll have an identity theft report, which is helpful when requesting that companies close fraudulent accounts in your child’s name.

When a child is a victim of identity fraud, you might want to add an extra level of security, Griffin says. “We can add what’s called a security freeze. This will effectively remove that credit history from the marketplace. It prevents anyone who’s applying for credit, any lender who’s requesting that report in response to an application, from accessing the report.”

Finding out your child’s credit has been compromised is not the end of the world. If you contact credit bureaus and creditors early, the related damage will soon be a thing of the past.

Kevin Cash is a staff writer covering credit cards and consumer credit for NerdWallet. Follow him on Google+.

Photo via iStock.