I am teaching a class about credit fraud at a local high school. A teacher mentioned to me that her daughter, who is under 12 years of age, has credit according to one of the credit reporting companies. How is this possible?
It is possible for a minor to have a credit report, but not the norm. It can happen in one of a few ways.
Authorized User Accounts May Be Reported
The most common way for a child to have a credit report is for the parent to list the child as an authorized user on one of their credit card accounts. While not all lenders report authorized user accounts to the credit reporting companies, many do. In those cases, the lender will report the account, creating a credit report using the minor's identifying information.
Typically, this is seen with young teenagers who may need a way to make purchases when they are not with a parent. As a matter of convenience, parents will make them an authorized user so they can use the credit card.
It's important to set clear boundaries on authorized users' spending and monitor the charges on the account carefully, but it also can be a great way to teach a child how to use credit responsibly.
It's also possible that a minor could apply for credit on their own, such as instant store credit, perhaps using their name but false birthdates or perhaps some of their parent's identifying information. That could also result in creation of a credit report in the minor's name.
The Credit Report May Be the Result of Identity Theft
Identity theft is another reason a child could have a credit report. A fraudster, or even a relative or guardian with access to the child's Social Security number, may use their information to apply for credit accounts or obtain utility services such as electricity or cellphone service. If this possibility is a concern, the teacher can check to see if there is an Experian credit report in the child's name.
You can also submit a written request to find out if your child has a credit file and to request a copy of the report. You can find a form with instructions online at Experian's Fraud Center. Simply click on the "minor child instructions" link under "additional resources." The form provides a detailed explanation of the documentation you will need to provide along with your request.
You might ask the teacher if she knows why her daughter has a credit report. If she was able to get a copy of the report, she should be able to tell you exactly why, and it may not be as nefarious as it sounds.
Thanks for asking.
Jennifer White, Consumer Education Specialist