Think identity theft is only a problem for grown-ups? Think again! CreditFresh explains how children may be victims, too.
Your kids may be too young to use a personal line of credit, but they may still have one open in their name, without them or you knowing. If scam artists get their hands on your child’s personal information, they may have what it takes to commit child identity theft.
Child identity theft happens when a fraudster uses a piece of a child’s identity to open fraudulent accounts under their name.
Like its adult counterpart, it’s a crime, and one that’s growing at that. More than 1 million cases of child identity theft or fraud were reported in 2017 alone. The average fraudster managed to steal $2,303 under the guise of a minor.
Think this is a tween or teen problem? You’d be wrong. Two-thirds of these victims were under the age of eight.
How Does Child Identity Theft Occur?
Minors can become victims of identity theft in much the same ways as adults. Let’s take a look at examples of some of the most common threats below.
A Data Breach
A data breach exposing their Social Security Number (SSN) may be all a fraudster needs to piggyback on their identity.
While minors or parents may not have shared this information with a typical financial institution, their SSN may be in records at a school, healthcare center, or government entity. Your child’s information may be exposed if these organizations get hacked.
Children may not have an active checking account or a line of credit. But it’s 2020 — they probably have an email or a smartphone. By age 12, half of them will have social media accounts. This online presence may be a way in for some industrious thieves.
Fraudsters “phish” for people’s personal information by blasting email addresses and phone numbers, asking for personal information. If your child isn’t aware of the dangers, they may take the bait and give out their info.
Family and Friends
Sadly, the people you hold close may also be a threat. This is true of both adult and child victims.
While people of all ages may be at risk, children are more likely to know the person who steals their information. Javelin Strategy & Research estimates 60 percent of child identity theft cases trace back to people they know — compared to just 7 percent of adult identity theft.
The families who face child identity fraud paid an average of $541, which parents have to pay out of pocket.
The phrase “like stealing candy from a baby” is particularly apt here. The process may be easy, and it has a sweet payoff.
The payoff is your child’s pristine credit file. Unlike adults, minors haven’t developed a credit history, so they have a totally blank slate ripe for the picking.
With the right information, fraudsters may open a line of credit, take out loans, and even start utility accounts under your child’s name.
All their activity may impact your child’s credit history before they’re even old enough to drive. More than likely, it will add negative entries that may make it harder to qualify for their first line of credit or student loan.
Check this out to learn what factors contribute to the calculation of a credit score. You’ll see how scoring models compare positive and negative entries to create a three-digit score.
More still, a child’s credit consumer file may be assumed to be non-existent and it isn’t under lock and key like many adults who may apply for credit regularly.
As an adult, you may know that it is important to check your credit often to make sure that your data is safe. But the same logic may not extend to your children. They’re kids, after all. They shouldn’t have a line of credit or credit card accounts for you to check!
Child identity theft may go undetected for years as a result. And in that time, fraudsters may run your child’s financial good name into the ground.
A great way to check for child identity theft is by requesting a report from one of the major credit agencies. This report will show any open accounts under your child’s name.
Seeing anything unusual here is a good indicator that your child’s data has been compromised. But this may not be the only sign that something’s wrong.
Here are some of the early warning signs of child identity theft:
- A collection agency calls your child or send letters saying they owe money
- The IRS gets in touch saying your child hasn’t paid income tax
- You are denied government benefits
The link between a credit score and identity theft is also reflected in the cases of child identity theft. A fraudster may do considerable damage to your child’s consumer report.
Add in the money you may have to pay out of pocket, and it may have a huge impact on your family’s future.
With this in mind, it’s important you act as soon as you suspect your child’s data has been compromised.
Request a Report
First, you’ll want to confirm that your suspicion is right. To do that, you’ll want to request a manual search of your child’s file from each of the major reporting agencies.
This search is different from a typical check you would use on your own file.
A manual search typically checks for two things:
- Any files that show both their name and SSN together
- Any files that flag just their SSN
This an important distinction in case a fraudster is using their SSN to commit synthetic identity theft. This crime uses real personal information (like your child’s SSN) with fake data (like a false name and address) to create totally new identities.
File a Report
If your suspicions are confirmed, sound the alarm! Child identity theft is a serious crime, and your local law enforcement needs to know about it. Get in touch with them to file a police report.
Alert the Credit Reporting Agencies
You also need to tell the reporting agency that shows the error that there is something wrong.
To do this, you must send a letter to their fraud department explaining your child is a minor and couldn’t have legally entered into a personal loan or line of credit contract.
The Federal Trade Commission (FTC) suggests sending the Uniform Minor’s Status Declaration along with your letter to prove that your child wasn’t behind these fraudulent accounts. You may also have to send a copy of their birth certificate.
In your letter, make sure to request that the agency removes all fraudulent accounts from their consumer file. This may also include information like account inquiries, delinquencies, or collection notices filed in their report.
So far, TransUnion is the only agency to have an online form to start an inquiry into your child’s identity theft. Otherwise, you’ll have to contact the agencies – Equifax, Experian, and TransUnion – over the phone or through the mail.
If you find a problem in a legitimate account — i.e., a line of credit or a credit card that is under your name and your child is an authorized user on — you will have to dispute the error through the normal channels.
This means contacting the reporting agency that shows the error and submitting documents that prove it’s a mistake.
Each of the three major reporting agencies accept disputes online. Or, you may also deliver a letter in the mail using their mailing address.
If you aren’t sure what to write, the FTC provides resources that could help you get your words out onto the page. Check out IdentityTheft.gov for action plans and other helpful tips to handle fraud.
Contact the Company That Furnished the Agency with the Error
Keep ringing that alarm. The company that shared the error in the first place needs to know the account is fraudulent. This may be a credit card company, a financial institution, or even a utility provider.
Get in touch with their fraud department to explain the situation: your child is a minor and therefore can’t be held responsible.
Be prepared to send verification of your child’s identity, such as a copy of your child’s birth certificate, alongside your letter.
Consider Placing a Fraud Alert on Their File
A fraud alert flags your child’s credit report for fraud. This flag is visible to any financial institution or reporting agency that checks their credit.
While in place, any financial institution must take extra steps to verify the applicant’s identity before extending a line of credit to a fraudster who is using a child’s name. The security measures could make it more challenging for scammers to pose as your child and open accounts under their name.
While this may prevent scammers from opening future accounts, a fraud alert doesn’t undo any past fraud in existing accounts. That’s why it’s so important to contact the reporting agencies first.
Consider Requesting a Credit Freeze
A credit freeze — or security freeze, as it’s also known — is a more formidable version of the fraud alert from above.
It’s also a free service that restricts access to your child’s consumer file. But it locks out financial institutions in such a way that they can’t pull any credit information from their file — with or without extended vetting.
This freezes out a fraudster who plans to open a sneaky account under someone else’s name.
Eventually, there will come a day when your baby is all grown up. Like many adults before them, they may want to open a line of credit or credit card for legitimate reasons. Before they can do that, they must remove this security freeze.
The above steps are intended to help undo the damage a fraudster causes in your child’s file. But they may take a long time to complete.
With that in mind, child identity theft protection and prevention are much more effective ways to keep your child’s file clear of black marks.
Here are some child identity theft protection tips to help you do that.
- Share Data Carefully: From schools and day camps to clubs and doctors — there are a lot of people who may ask for your child’s SSN. But not all of them need it. Be wary of who you share this information with. There’s no guarantee a company’s security will prevent child identity theft.
- Keep Documents Safe: Remember, even family and friends may be the one stealing critical data. Make sure you store your child’s personal information in a safe place, so it’s not easy to pinch.
- Shred Documents: If disposing of hard copies of their personal information, always make sure you shred them before you throw them out.
- Talk about Online Security: Depending on their age, your child may spend a lot of their day in front of the screen. The average teen spends more than seven hours a day on a device! Have a conversation about how to do so safely. Let them know what information is appropriate to share online and make sure they create strong passwords to keep thieves out.
- Discuss Financial Literacy: Tweens and teens have a right to know how their future may be impacted by choices that are made today — even if they aren’t the ones to make it. Educate your child on important financial terms and concepts to improve their financial literacy. While this may not prevent child identity theft, it will help them understand the risks of various financial products and services. You can also give them a practical example of a credit product, such as a personal line of credit. Discuss how an online line of credit works and how it may impact their credit history.
Stay Alert and Keep Your Kids Safe!
There’s no absolute guarantee you’ll be able to prevent child identity theft. But hopefully with this article, you will be able to identify some of the risks and steps to prevent child identity theft, including getting the authorities involved from the start.
Still curious about identity fraud? Check out the CreditFresh Resource Center for more information about identity theft protection.
Posted in: Lifestyle