A Guide for New Parents on Identity Protection and Credit Scores
Whether you just got confirmation via the plus sign on a stick or you're about to wrap your bundle of joy up for their first trip home, you probably have a lot on your mind. Being responsible for a whole other person and their future is a lot.
From which car seat to buy to how soon you can feed baby table food, you have many questions and probably not enough time between diaper changes and feeding times to do all the research. And you may not even have scratched the surface on forward-facing questions such as personal finance. Not to worry; we've put together a new parents’ guide to credit scores and identity theft to make this particular area easier for you to manage.
New Parents and Identity Theft Concerns
Identity theft is a concern for everyone, not just new parents. According to the 2020 Identity Fraud Study from Javelin Strategy & Research, 13 million people were victims of identity fraud in 2019. And according to CNBC, identity thieves are more likely to capitalize on a child’s personal information.
It might seem odd that fraudsters would look to children as an opportunity; most kids don't have any assets or accounts to steal from. What they do have, however, is a fresh, new Social Security number.
Here's why SSNs belonging to kids are so attractive to scammers:
They're fairly clean. There's not a lot of records tied to these SSNs, so it's easier to use them to create a clean slate that can be used to open new accounts or score benefits.
They're not being used. Children aren't using their SSNs to open bank accounts or take out loans, so there's less chance that creditors or others will have duplicated accounts.
They're not being watched. Many parents don't think to monitor activity related to their child’s Social Security numbers. So, if a scammer can get that number, they believe there's a good chance they'll get away with the fraud for a long period of time.
Here are some reasons to be concerned about identity theft as a new parent:
If you (or your partner) are victims, that can put strain on the family finances. Having your bank account wiped out or your card's credit limit maxed out is no fun, and it can put you in a position of going without — even if it's for a few weeks while the matter is resolved. That's not ideal when you're caring for a baby and might need formula, diapers and other supplies.
Identity theft can have long-term consequences for credit and finances. This is especially true if you're not keeping an eye on your credit regularly. The longer someone's using your identity, the harder it is to unravel it all. And that can make it difficult for you to buy things and access financing you might need as your child grows.
It may leave your child without necessary benefits or opportunities. If someone uses your child's SSN to access benefits, it can make it more difficult for you to apply for those and other benefits for your child if they end up needing them.
Why Credit Matters for New Parents
One of the casualties of identity theft is often someone's credit score. Identity thieves may use your personal information to take out loans or credit cards in your name. And seeing as these people are criminals, they're not really likely to pay those debts responsibly, which means eventually the accounts end up in collections.
Negative activity, such as unpaid accounts, shows up on your credit report, which could bring your score down. Lower scores can make it harder for you to achieve things that new parents and growing families might need. A poor credit score could get in the way of:
Getting a mortgage on a new or bigger home to fit your family
Getting an affordable car loan for a more family-friendly vehicle
Getting loans or credit cards to help you manage finances as your family grows and has differing needs
Getting a new job if the employer checks credit as part of the background check
Getting utility service or auto insurance without a deposit
Did You Know Your Baby's Credit Is Important Too?
All this is true for your baby's credit too. In fact, in some cases, it's truer because a child's credit is similar to the SSN in that it's clean, new and often not being watched.
Fraudsters gamble that parents aren't checking up on their children's credit. It's possible no one is going to check it until the child is 18 or older and seeking their own credit cards, loans or auto insurance.
That's a lot of time for scammers to run amok with your children's personal information. And if your child applies for a loan only to find out their score is in the basement, they may have a tough time recovering from fraud that has been going on for so long.
Tips for Safeguarding Credit and Personal Information for You and Your Children
Here's some good news: It's not that hard to put processes into action to help safeguard both you and your children's credit and personal information.
Here are some tips for new parents that want to do so:
1. Safeguard sensitive information.
The unfortunate truth is that it's impossible to keep all your sensitive information 100% safe. Cyberattacks are common, and even careful retailers and other companies end up with data breaches.
That doesn't mean you shouldn't take some responsibility for your data, though. You can do a lot to reduce the risk that it ends up in the hands of a scammer. Here are some easy actions to take to protect your information as well as your child's:
Keep sensitive documents secure. Invest in a fireproof lockbox and store important documents, including Social Security cards, inside.
Protect SSNs. Don't enter them online or anywhere unless it’s a site or place you trust. In many cases, forms that have a blank for SSNs, for example, don't actually require the number, and you may be able to use an alternate ID form. Ask before you write down your information.
Shred paper with sensitive information. Scammers will go through people's trash to find information they can use to steal identities. So, consider buying a small home shredder for use with bank and account statements and any other documents that contain personal or financial information.
Use strong passwords. Choose passwords that are hard to guess and don't use the same passwords for various accounts. At minimum, use passwords that are 12 characters with at least one capital letter, one number and one special character. Making it a completely random order of characters is even better.
2. Monitor credit — yours and your child's.
Keeping a regular eye on your credit reports is great way to catch identity theft early. Your score going up or down without reason could indicate someone's taking out credit in your name, and if you see something odd on your credit score, you can take action before it becomes a bigger problem.
While you're keeping an eye on yours, don't forget to check your child's credit to make sure no one is using their good name until they get old enough to use it themselves.
3. Consider using credit lock or freeze options.
One way to get peace of mind about your child's credit is to lock it down. Anyone can freeze their credit with the credit bureaus. That means when someone tries to pull the report to evaluate you for credit, they can't see it. It's locked.
Locking a credit report makes it hard for people to use your identity or your child's to run up debt. If you lock your own credit, know that you need to unlock it before you apply for loans or other credit yourself, though.
4. Manage finances well to support a good credit score.
Taking on debt you can afford and paying bills in a timely manner can help you keep your credit score high. And that's good for you and your entire family because it opens more doors financially as you grow.
5. Model good financial management for children.
Help set your kids up for better credit scores and security in the future by teaching them good financial management early. Start savings habits early and talk to your kids about the importance of protecting their information, especially online.
Yes, identity theft and scams exist. And unfortunately, being a minor doesn't keep you safe from these criminals. But parents can take a proactive approach to keeping themselves and their children safe. It's never too early to start.