Children shouldn't have to worry about damage to their credit scores, or having their identities stolen, but unfortunately they do, and there are steps that parents should consider taking to keep that from happening.
In some states, parents will have to wait until a new federal law kicks in on Sept. 21, if they want to freeze the credit files of a child under the age of 16 at no cost. In South Carolina, parents already have the right to do that, under state law, and I'll explain how it works.
Here's why it matters: Children are considered particularly vulnerable to ID theft because they typically have Social Security numbers but are unlikely to have credit files. So, no one might quickly notice if a child's Social Security number were used to obtain credit or government benefits under a fake identity.
The background portion of the new Economic Growth, Regulatory Relief, and Consumer Protection Act explains that "if a fraudster is able to obtain a consumer’s personal identifying information he or she could 'steal' that person’s identity, using it to obtain credit with no intention of repaying. The unpaid debt would then appear on the consumer’s credit report, making him or her appear uncreditworthy and potentially resulting in a denial of credit or other adverse outcomes."
"In September 2017, Equifax announced a security breach in which the sensitive information of an estimated 145.5 million U.S. consumers was potentially compromised, which highlighted the importance of this issue," the statement continues.
These concerns aren't new, but with each massive data breach these concerns have grown.
This may sound sadly familiar to Palmetto State residents, who had to deal with the 2012 data breach at the S.C. Department of Revenue, when information about 6 million taxpayers and dependents was compromised. South Carolina residents have been eligible for state-paid identity protection monitoring since then, and still are through Oct. 31. (For information, call 855-880-2743.)
The breach at credit-reporting company Equifax last year compromised the information of nearly half of all South Carolina residents, the company told state officials. There's some irony here, because Equifax is one of the companies that I'd suggest parents reach out to.
What parents can do — it's free for South Carolina residents and soon will be nationwide — is to contact Equifax and the two other major credit bureaus and freeze the credit files of their minor children.
A credit freeze restricts access to a credit file, and is intended to keep the information from being used to open new accounts or perpetuate fraud. Some companies attempt to sell monitoring services to people requesting a credit freeze, but the credit freeze alone is free.
A credit freeze remains in place until it's lifted (to apply for a credit card or loan, for example). For a child, a parent can lift the credit freeze, or the child can once they reach age 16.
And how can you freeze a credit report for a child who may not have a credit report? The new law requires consumer reporting agencies to create one, so that it can be frozen, if a freeze is requested.
The law also extends the duration of initial fraud alerts, from 90 days to one year. A fraud alert on your credit report will "tell any business that runs your credit that they should check with you before opening a new account," the Federal Trade Commission says.
Any adult can freeze their own credit reports. That comes with pros and cons. It's good protection against fraud and ID theft. The downside is you generally can't apply for loans or credit cards or anything that requires a credit report, such as renting an apartment, until after you request to have the security freeze lifted.
Reach David Slade at 843-937-5552. Follow him on Twitter @DSladeNews.