child-identity-theftI’ve got 3 kids of my own. Two of them just expe­ri­enced that dreaded first day of a new school year and one has just recently made an appear­ance in this world. If you’ve got kids of your own, then you under­stand the mean­ing behind my state­ment that they mean the world to me. I would do any­thing for them. Yet many of us, as par­ents, don’t even give a sec­ond thought to the idea that iden­tity thieves might actu­ally go after our chil­dren instead of us. After all, we’re the adults. We have the estab­lished credit his­to­ries, right? There’s more to gain from steal­ing from us… right?

Unfor­tu­nately that is wrong. Did you know that iden­tity theft rates have dou­bled for chil­dren who are aged 5 or younger just in the past year? That is a very dis­turb­ing trend. Why are iden­tity thieves going after the youngest among us?

Because they have a clean slate. They are not marred by bad finan­cial deci­sions, a bad econ­omy, past judge­ments, or any other neg­a­tive infor­ma­tion. Though there is no infor­ma­tion because the aver­age kinder­gart­ner is not going to apply for credit, that is bet­ter to the iden­tity thief then run­ning the risk of get­ting an adult’s iden­tity that has a credit score below 600 and very lit­tle prof­itabil­ity from it. You can monitor your credit score for free at Credit Sesame.

Iden­tity thieves also know that there is a very low risk of being dis­cov­ered when the theft of a child’s iden­tity occurs because let’s face it – how many times do we as par­ents actu­ally check our kid’s Social Secu­rity num­bers for activ­ity? We’re too con­sumed with all the other activ­i­ties in life that hav­ing young chil­dren brings, such as potty train­ing, deter­min­ing how to con­vince your picky eater that din­ner is actu­ally good for them, teach­ing let­ters and num­bers, or going out to the park to expe­ri­ence the sim­ple joy of a slide. We don’t think about the fact that some­one might want our child’s iden­tity to profit from it, and so some child iden­tity theft events remain undis­cov­ered until our chil­dren turn into adults and apply for stu­dent loans or their first car loan.

The prob­lem is the sys­tem. When an iden­tity thief gets a child’s Social Secu­rity num­ber, they know that there will likely not be an activ­ity on that num­ber until they turn 18. All they must do then is estab­lish their own credit his­tory on the stolen account. They can do this because when a poten­tial lender runs the SSN, they’ll find it to be valid. All a thief must do is pro­vide their own infor­ma­tion on that num­ber with the proper iden­ti­fi­ca­tion and that’s really all it takes for the infor­ma­tion to be added to the credit file on that SSN and a new credit line to be issued.

Then what do the iden­tity thieves do? They build up debt and then dis­ap­pear, leav­ing you and your child to deal with the prob­lem. For one child, that meant $1.5 mil­lion in debts run up in 10 years because an iden­tity thief used her SSN from the time she was 9 and she only found out about it at the age of 19 when she went to apply for what she thought would be her first line of credit. For another child, six dif­fer­ent iden­tity thieves were using her iden­tity to their benefit.

Iden­tity thieves use a child’s iden­tity to get a job, to stay out of trou­ble from an arrest, or to even just open up new bank accounts. The costs can be high for both you and your child because a poor credit report could mean not get­ting a job, not get­ting a stu­dent loan, or even not get­ting into col­lege. With stakes that high, we as par­ents really can’t afford to just sit back and do noth­ing… but just check­ing their credit reports doesn’t really do any good. That’s because the action is on the SSN.

Don’t think it will hap­pen to your child? IdentityGuard reports that over 10% of peo­ple who check their child’s iden­tity through the KidSure report find sus­pi­cious activ­ity occur­ring. Over 10%! That means 1 out of every 10 fam­i­lies that read this post have a child that has likely had an iden­tity stolen.  Time to start taking your childs identity protection a bit more seriously.  A credit monitoring plan that includes child protection can help.

Many older Americans who are underemployed due to the current state of the economy may consider applying for social security benefits to supplement their income.  Continuing to work while also receiving benefits may cause those benefits to be reduced more then they think.  If you are not on disability and currently under the full retirement age of 66, you will be impacted.

An earnings test is the easiest way to determine how you might be impacted.  Generally the earnings test is based on income earned during the year as a whole, not month by month.  The Senior Citizen’ Freedom to Work Act mandates the retirement earnings test is eliminated in the calendar year in which you reach your full retirement age.  You do not have to worry about an earnings test after you reach 66, however, the earnings test still applies for the time period before you reach full retirement age.

Currently, social security benefits are impacted by earnings at a rate of $1 for each $2 earned over the exempt amount, which is currently $14,160 annually.  The year that you reach your retirement age, your earnings are impacted at a rate or $1 for each $3 earned, and the exempt amount increases to $37,680 (currently for 2010).  The month you reach full retirement age, earnings are no longer affected.

Example of the earnings test:

A man age 62 makes $3000 per month at his job.  Based on past earnings history, he expects his social security benefits to be about $1400 per month or $16,800 annually.

Since his annual salary is over the exemption amount of $14,160, he is subject to the earnings test.  His annual salary is $36,000 so he would reduce that by the exemption amount of $14,160 leaving $21,840 above the exemption.  His social security is decreased by $1 for every $2 over the exemption, so you basically divide the figure by half.  Thus, his social security benefit would be reduced by $10,920 ($21,840 divided by 2).  Therefore he will only be receiving social security benefits of $5880 per year ($16,800 – $10,920).  Much less than the original amount of $16,800 he originally expected.

As you plan your retirement, remember to factor the earnings test in the picture if it applies to you.  It might affect if you choose to receive partial social security benefits or not.  In the long run it might not be the best decision.

stat_smpl_FSSum_20111114There is a good deal of information available about personal credit, how to maintain or improve it, and what you can do to prevent identity theft. However, there is not a lot of information readily available on business credit reporting and how it can affect your personal credit. There are a variety of business entities available and some specifically do not interfere or intersect with your personal numbers. However, sole proprietorship does. For that reason, this article looks exclusively at that entity.

What is a Sole Proprietorship?

A sole proprietorship is a business entity that is run by one person, and there is no legal distinction between the business and the personal assets. When you sign up for a sole proprietorship account, you will most likely use your own social security number as the Employer Identification Number, which means that any transactions you do as the business will also show up on your personal credit report. The credit bureaus will create a business credit report for the business name, and they are separate than that which you have for your personal credit report, but they do intersect.

What are the Differences between a Business and Personal Credit Report?

For sole proprietors, the differences between the business and personal credit reports are very minor. In a personal credit report, you can find the following:

  • Identifying Information
  • Account Information
  • Public Record Information
  • Inquiries
  • Dispute Instructions

Business credit reporting works much the same way; however, there are a couple of different pieces of information gathered. Business credit reports contain the following:

  • Identifying Information
  • Payment Information
  • Public Record Information
  • Inquiries
  • Company Background Information
  • Business Credit Score

Personal credit reports do not contain the credit score as part of the report. If consumers want their score, they will have to purchase it separately. However, business credit reports come with the business score. The scores themselves are different, as well. Although what makes up the score is roughly the same, the business is scored on a scale of 0-100, while the personal score will run between 350-850.

Will Lenders Look at Personal Credit When Applying for Business Loans?

Many small businesses have little to no business credit for lenders to evaluate, so as long as the business is a sole proprietorship, lenders will look at personal credit for reference purposes. It gets more complicated when the business is run independently, because in this case business and personal assets are completely separate. However, for a sole proprietor, personal credit can help establish business credit.
As a new business, you will build relationships through vendors such as wholesalers, suppliers, leasing companies, and even financial institutions. Once these relationships are established, you can use less of your personal credit, and more of your business credit. When starting a sole proprietorship, you may not have any business credit established. In that case, lenders will often look at your personal credit as a reference.
Over time, your business will establish the credit it needs to be looked at on its own merits, but until that happens, it is important to keep both your personal and your fledgling business credit in good order.  Monitoring your personal or business lines of credit is an important method of detecting errors or even fraud.  Learn more about this process here.  

 

The obvious main benefit is to provide financial security for your family or loved ones after you are deceased.  Life insurance is not for you, it is for other people you care about.

Life insurance comes in two types.  Term life insurance and whole life insurance.

Term life insurance is just what the name implies – it is for a set term or period of time.  Rates vary depending on several factors such as health of the insured, age, etc.  However, term life insurance is cheaper than whole life insurance because you are not accumulating any value in the policy itself.  If you stop paying the premium and walk away, the term life insurance policy is over and what you have paid is the insurance company’s profit for insuring you.

Term life insurance can be particularly beneficial for younger families because it is generally a cheaper way to have life insurance.  At this stage the family may not have much else in the way of security such as a home that is paid off or a healthy 401K.  The school of thought is that later in life, you have other instruments that decrease the need for life insurance somewhat.  These instruments include savings accounts, retirement accounts, land, a house, etc.

It is typical that a young person can find term life insurance for several hundred thousand dollars for less than $20 per month.  Even if you are living paycheck to paycheck, you should be able to budget this amount per month.  I believe it is extremely important to have some type of life insurance especially if you have a family with children.

Whole life insurance is different than term life in that the policy also accumulates cash value.  Whole life insurance can be used as a savings vehicle in addition to providing life insurance benefits. The policy is viewed as an asset, and the holder of the policy can borrow against the policy or even withdrawal money out of the policy.  The downside is that the monthly or yearly premiums are usually higher.  Also, there is usually a fee if you cash in the policy.

In the past whole life insurance policies were common instruments used for savings or retirement.  Whole life policies lost some luster with the emergence of mutual funds, discount brokerage companies, and the internet information age.  People had information at their fingertips and no longer had to depend on their local insurance agent being the one to advise them they need whole life insurance and the benefit was that it accumulated value.  However, in the last several years, with our economic downturn, this writer thinks whole life insurance will look more attractive.  Usually the rates you earn or money you accumulate is steady and guaranteed (obviously as long as the insurance company is solvent). Diversification is important, and personally I am glad I have my whole life insurance policy – its value has not decreased any in the last 12 months, plus, I still have the security of knowing my family has life insurance as well.

In this internet age, I encourage you to evaluate your life insurance needs.  Find a good company and put a plan in place if possible.