Foster youth: How to protect and build credit

Monitoring credit activity is crucial for anyone – but especially for those in the foster care system. The odds that a child who’s in the system will be at risk of having their personal information compromised is exponentially higher than those who aren’t. And with identity theft being a primary method of financial fraud, it adds another layer of sensitivity to an already sensitive process. 

Credit protection is priority number one. Whether it’s for a foster child who wants to build their own credit history after they turn 18; or for a foster parent who may have to deal with their child’s complicated personal history, the importance is the same. The goal is to create a financially stable life into adulthood. So, establishing a habit of checking credit reports regularly will go a long way toward reaching that goal.

How identity theft affects your credit

If someone else gets access to your full name and Social Security number, they can very easily open credit cards and take out loans in your name. Once approved:

• The credit issuer will send the account information to the credit reporting agencies and a credit file is created for you. 
• The identity thief gets the credit product and uses the funds.
• The credit issuer sends the bills, but you may never see them and they go unpaid. 
• The credit issuer sends notices of late payment to the credit reporting agencies, which show up on your credit reports. 
• If the credit issuer reports the debt to a collection agency, that company will probably list the account on your file. 

Since all of this is happening without your knowledge, the crime can go undetected for a long time. 

Outside of feeling violated, your credit score takes a major hit. FICO® and VantageScore are two of the most common credit scoring companies. They turn the information listed on your credit report into scores ranging from 300 to 850, with higher numbers being preferable. For every ding that shows up on your report – missed payments, high debt, and collection accounts – your score gets depleted. 

Damaged credit reports and poor scores will impact your ability to do everything from qualifying for any additional credit cards to renting an apartment. And you may want to borrow money to purchase a home or car in the future, at which point, good credit scores will be important. 

Think you might be a victim of identity theft? Know your rights. 

Although being a victim of identity theft may make you feel powerless, know that you are protected by law against all kinds of abuse, including financial. The Child and Family Services Improvement and Innovation Act was developed with you in mind. The provision most relevant to you on this topic:

For any youth in foster care at age 16 or older, the state must annually obtain the child’s credit report. It will be provided to you at no cost, and include an explanation about what is being listed and appropriate guidance.

So if  there are errors or evidence of fraud, your case worker should be able to help by pulling your reports and assisting with the dispute process. 

You can also have your credit report frozen, and it’s usually a good idea. This protects you by preventing your credit report from being accessed. By law, a parent or guardian may freeze your credit report for you if you’re under the age of 16. If someone were to apply for credit using your personal information, the lender would not be able to check your credit report. Without that access, it would be much more difficult for someone to open a credit product in your name.

How to check your own credit report

Although the law stipulates that your caseworker must pull your credit report and share it with you along with information on how to deal with problems, you can also access your credit report on your own. As long as you’re at least 13-years old, whether you’re in the foster care system or not, you can check your credit the same way an adult would. 

Log into AnnualCreditReport.com. Once there, you can obtain your report from the three major credit reporting agencies: Experian, Equifax, and TransUnion. You may get one complimentary credit report per agency every year. 

These agencies do not knowingly create reports and keep data on anyone younger than 13, so if you enter your personal information and nothing comes back, that’s perfectly normal. Most children under 18 won’t have a credit report yet. So, while you may be at an increased risk of identity theft, you can at least rest assured knowing a report hasn’t been created without your knowledge. 

However, just to be sure, here are some warning signs that a credit report has been generated in your name: 

• You’re getting pre-approved credit card applications
• You’re receiving bills or credit cards in your name
• Collection agencies are contacting you
• You try to open a bank account but are denied because of what is on your credit report

How to dispute fraudulent activity on your credit report

In the event that you do have a credit report and spot signs of identity theft, dispute it with one of the credit reporting agencies. This is where your caseworker comes in, but you can also do it yourself. 

If you are a foster parent and suspect your child may have been a victim of identity theft, read these instructions on how you can freeze a minor’s credit.

Thankfully, you have clear evidence that the accounts opened in your name are not yours, because you aren’t legally old enough to sign a contract. 

The easiest way to remove inaccuracies from your credit report is to visit one of the credit reporting agencies’ websites. Once you dispute the data, the other two agencies will be alerted to the investigation. 

Experian: https://www.experian.com/disputes/main.html

TransUnion: https://www.transunion.com/credit-disputes/dispute-your-credit

Equifax: https://www.equifax.com/personal/disputes/

On the dispute form, you can provide an explanation for why the information on your report is incorrect. Include your date of birth and current age to indicate why you couldn’t have legally opened the account. The item(s) in question should be removed after an investigation, which usually takes fewer than 30 days. 

As per the Federal Trade Commission, you should also contact the companies that were affected or used to commit fraudulent activity. For example, if someone opened a credit card in your name, call that issuer and ask to be connected to the fraud department. (You may need an adult’s help with this kind of communication, so don’t hesitate to contact your caseworker.) 

Tell the representative that you were a victim of identity theft, and that the account is fraudulent. Ask them to close the account and send you a letter confirming that you are not responsible. It’s a smart idea to back the conversation up with a letter that summarizes the conversation you had. Attach a copy of your birth certificate as proof that you are not liable for the debt and the account is not yours. That should do the trick. 

If your caseworker isn’t being helpful or you’d rather look elsewhere for assistance, Eva Velasquez of the Identity Theft Resource Center recommends looking elsewhere for resources. “You need someone you trust on your side,” says Velasquez. “Reach out to the Federal Trade Commission, your local police department, the Department of Health and Human services in your area or a nonprofit in your community that can provide you with guidance. Overcoming identity theft can be tough but can absolutely be done.”

In the meantime, be careful not to expose your personal identification documents for risk of anyone else misusing your information. “Don’t overshare your information on social media and online accounts,” says Velasquez. “For example you may be proud that you finally got your driver’s license, but do not take a picture of it and post it online.”

Building your credit once you’re financially independent

Now comes the exciting part: taking control over your credit destiny. Once you reach the age of 18 and you’re ready to start charting your own financial course, here some signposts that will help:

• Open a credit card. It’s fine to start small with a secured credit card that has a low credit limit. The money you put down guarantees the account, so they’re relatively easy to get. Once you have your card, charge a regular and affordable expense, then pay the bill on time and in full. That activity will show up on your credit report and make you look like a responsible borrower. Some secured cards will transition into unsecured cards after a specific number of on-time payments, and you’ll get your deposit back. But even if it doesn’t, the security deposit acts as a savings account, so it’s nice to have tucked away. 

• Set transaction alerts. With many credit cards you can arrange an electronic alert (text or email) every time you make a charge. If someone else is using your credit card, you’ll know about it immediately and can take swift action. 

• Protect your plastic. Do not share your credit card with anyone or leave it or the account documents in public. Opt to have your statements delivered electronically. Download the credit card issuer’s app to your phone, and use it to manage the account in private and on the go. 

• Become an authorized user. Another way to add positive credit information to your report is to piggyback on someone else’s well-managed account. If you know an adult who has a credit card (and treats it right), you may ask to be an authorized user. If they agree, you will benefit because the positive account activity will show up on your credit report. 

• Monitor your credit reports. It is your responsibility as a consumer to check your credit reports on a regular basis. Check one every few months. Then if you see something on it that’s  incorrect, dispute it immediately. You know the drill by now. 

• Track your credit scores. Remember that all the information on your report is being factored into your overall credit scores. Check those numbers after about six months of credit card use, and again when you hit the year mark. You should see progress. The higher your scores, the better!

• Add a loan, if you need and can afford it. At some point, you may want to use a loan to help with buying a car. As long as you have enough income to easily meet the payments and your scores will get you a low interest loan, go for it. By making regular installment payments, your credit scores should increase even further. 

Dealing with the fall-out from identity theft is never fun, no matter your age or how it happens. As you take the steps to fix the damage and move forward, there are times when you may feel frustrated or hopeless. Take a breath, ask for assistance from a truly helpful individual or organization, then preserver. You have your whole life ahead of you and this hardship doesn’t have to define it. 

How parents and guardians can freeze a child’s credit report:

TransUnion

Refer to this TransUnion page for information on how to place a credit freeze.

• Write a request to place a “protected consumer freeze” on the child’s file.  
• Include one piece of documentation that provides ‘sufficient proof of authority’ that you may act on behalf of the minor or dependent, such as: 
  • an order issued by a court of law
  • a lawfully executed and valid power of attorney
  • a document issued by a Federal, State, or local government agency in the United States showing proof of parentage, including a birth certificate
  • with respect to a protected consumer who has been placed in a foster care setting, a written communication from a county welfare department or its agent or designee, or a county probation department or its agent or designee, certifying that the protected consumer is in a foster care setting under its jurisdiction.
• Include information or documentation that provides ‘sufficient proof of identification’ for yourself as well as the minor/dependent, such as: 
  • a Social Security number or a copy of a Social Security card issued by the Social Security Administration
  • a certified or official copy of a birth certificate issued by the entity authorized to issue the birth certificate
  • a copy of a driver’s license, an identification card issued by the motor vehicle administration or any other government issued identification

Send to: 

Experian

Fill out this credit freeze form from Experian’s website. You will need to include:

• The child’s full name, Social Security number; date of birth; current mailing address and previous addresses for the past two years
• Your full name
• Your Social Security number; date of birth; current mailing address and previous addresses for the past two years. 
• Copies of the child’s birth certificate and Social Security card, and one copy of your government issued identification card, such as a driver’s license, and one copy of a utility bill, bank or insurance statement. 
• If you are the protected consumer’s guardian, submit a copy of the court document naming you as the guardian. 

On the form you will write:

your name, address, Social Security number, Date of Birth, and home phone number  

Send to:

Experian Security Freeze

P.O. Box 9554

Allen, TX 75013

Or overnight to:

Experian

701 Experian Parkway, 

Allen, TX 75013.

Equifax

Complete and download this minor freeze request form. You will need the following pieces of information and documentation: 

• Your proof of identity: such as a copy of your driver’s license, Social Security card or birth certificate
• The child’s proof of identify: a copy of the child’s Social Security card and birth certificate 
• To show you are the minor’s parent or authorized representative, provide the minor’s birth certificate, a court order, lawfully executed and valid power of attorney or foster care certification

On the form you will write:

• Your name, current address, former address, Social Security number and date of birth
• The minor’s name, current address, former address, Social Security number and date of birth

Send to

Equifax Information Services LLC,

P.O. Box 105788 

Atlanta, GA 30348