The Economic Growth, Regulatory Relief and Consumer Protection Act was passed in May and many of the consumer protection laws go into effect in September. Among the most notable changes are:
- Credit bureaus can no longer charge you to freeze your credit.
- You can now freeze your child's credit.
I've written extensively on why you should consider freezing your own credit. So, for this blog post, I'll focus on the ability to freeze your child's credit.
Children are not born with credit reports. You need a credit history to establish a credit report. So in most cases, if your minor child has a credit report, that could signal a problem. Your first line of defense is to check periodically to make sure your child doesn't have a credit report. You can generally do this by submitting a request with the bureaus online. The next and higher level of protection would be to freeze your child's credit.
Prior to the passage of the law, 33 states wrote their own laws to allow for the freezing of you child's credit. However, Massachusetts was not one of them. So it was impossible to freeze your child's credit with all of the major bureaus.
Why consider freezing your child's credit? First, if their identity is compromised, then it may take years before it is discovered. Perhaps at around the same time they apply for their first credit card or go to open a checking account for the first time. Secondly, the Social Security numbers of children are much more valuable to criminals than those of adults. This is due to a scam known as Synthetic Identity theft. Basically, a criminal steals a child's Social Security number and then links it to a fake name, date of birth, and address. Then they open accounts wherever they can, and neither you nor your child will ever receive any communication about these accounts. This is a major reason why these scams can go unnoticed for years.
Under the new law, if your child doesn't have a credit file, then the law directs the bureaus to create one, and then lets you freeze it. If your child does have a credit file, then you'll first want to figure out why and whether or not it's a problem.
So, should you freeze your child's credit? It's hard to see the downside outside of a little effort and organization. As with any credit freeze, you'll need to be highly organized and save the PINs that you are issued. However, these efforts pale in comparison to the efforts that will be needed if your child's identity is compromised.
Breakwater Financial, LLC is a registered investment advisor. The content of this blog post is for informational and educational purposes only and is not to be considered investment advice. If you have any questions regarding this Blog Post, please contact us.