#186 | Protecting your child’s identity and creating a strong credit score

January 30, 2023

Episode Summary:

 

In this week’s episode, we share how to protect your child’s financial identity and create a strong credit store to set them up well for the future. We dig into why this matters and the specific steps and recommendations for what to do. 

 

Episode Notes:

 

Let’s start with the typical protections: credit freezes and credit monitoring. Monitoring is like having a security camera in your house, while freezes are like having a wall around your house.

 

So why not just freeze a minor’s credit? Not that simple. You need a report to start a freeze. And the only way to have a report is to open a line of credit. See the problem? But there’s a way to protect your child and build a long credit history.

 

  • Step 1: Freeze your child’s reports at Transunion, Equifax, and Experian. Equifax and Experian now how a specific form for a minor’s freeze. For Transunion, you’ll need to write a letter.
  • Step 2: Check for any issues: If your child is over the age of 13, it’s possible to search for a credit history for anyone over the age of 13 using the AnnualCreditReport.com. If your child is under the age of 13, parents must contact each bureau by mail and provide identity documentation.
  • Step 3: Assuming everything goes well, add your child as an authorized user to every credit card you have, assuming the cards allow it. This sometimes, but not always, triggers the credit bureau to report history on that social.
  • Step 4: Pay your bills! Don’t ruin it for your child by messing up your credit score and the kids.

 

Let this above approach ride for 18 years and your child will have protected credit reports and a strong history of credit. This can help them with student loans, new credit cards, opening a bank account, renting, buying or leasing a car, or buying a home. All of these things can also become very difficult if the child was the victim of identity theft.

 

A few additional things you can and should do to protect the identity of your child:

  • Keep their Social Security number safe.
  • Educate them about online activity and monitor it.
  • Don’t share personal info unless absolutely necessary.
  • Shred everything.

 

What else can you do to build credit for a child?

  • Co-sign a small loan with them.
  • Open their own credit card if they’re old enough.
  • Open a credit builder card.

Top 3 takeaways:

  1. Identity theft is a big problem for kids and can go unnoticed for years.
  2. It’s easy to protect their credit report by placing a freeze with the credit bureaus.
  3. Adding kids to your lines of credit can help them build strong scores.

 

Show references:

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