While you may find it surprising to think that a minor could have credit problems, the truth is that there are many instances in which minors have turned 18 only to find their credit in poor standing. How can this happen? and What can you do to prevent it?
With the information and technology age comes greater risk for identity theft. The Federal Trade Commission reports that hundreds of minor children become victims of identity theft and credit debt fraud each year. As a parent it is your job to protect your child from such occurrences, here is how:
Protect personal information — children have social security numbers, which means they could be tied to accounts and a line of credit unknowingly. Between receiving mail with your child’s social security number on it and online transactions, their personal information is out there to be used by thieves. It is important to shred information containing your child’s personal information and never give it out to unauthorized personnel.
Monitor credit reports — just like your own credit history, you need to be keeping an eye of your child’s. You can obtain a free copy once per year of your child’s credit report to be sure there isn’t any unauthorized activity being reported. Monitoring a credit report is the easiest way to become alerted to any fraud or identity theft.
Keep them separate — sometimes parents issue a credit card in their child’s name or put them on as a “user” of the account. This essentially creates joint liability over the debt accumulated on the card. If you were to default a creditor could attempt to collect, even from a minor child. Avoid putting children on your debt accounts or issuing cards in their name until they are of age to be responsible for managing their money and payments towards the card.