How did your toddler rack up thousands of dollars in charges on an unfamiliar credit card?It's not Junior's fault if identity thieves have stolen your child's identity and used it for fraudulent purchases.
According to Javelin Strategy and Research, over one million children were identity theft victims in 2017, racking up over $540 million in direct cost burdens to affected families.
Your child's identity is a desirable target for identity thieves because the theft is often undetected for years. Why would you expect an underage child to have credit activity? A new Experian survey finds that the average age of a child identity theft victim is twelve – implying that many years may pass before you find out about the crime. Even worse, your child may find out later in adult life when they try to open an account and discover their credit has already been abused and ruined.
When parents discover the fraud, how do they usually find out? Typically, either a bill or credit card arrives in the mail (25% of respondents in the Experian survey) or a collection agency calls (24% of respondents). Another 19% of respondents found out when they tried to open a financial account in their child's name.
According to survey results, the damage is long lasting. It takes three years on average to resolve a child's identity theft, and one-quarter of victims are still dealing with the effects a whopping ten years later.
Prevention is always the best step to combat child identity theft. Give out your child's personal information only when absolutely necessary and ask how that information is protected. Keep physical documents containing your child's personal information safely locked away and take appropriate steps to protect electronically stored versions.
Unfortunately, you can't control every place your child's information is stored. Consider applying a credit freeze in your child's name, which prevents lenders from accessing his or her credit file to open new accounts.
Start by checking with the three major credit bureaus (Experian, Equifax, and TransUnion) to see if a credit file already exists. Report any fraudulent file to each of the credit bureaus and place a freeze on the account with each agency. Instructions and other useful information may be found at the Federal Trade Commission's IdentityTheft.gov website. Choose "Special Forms of Identity Theft" and then "Child Identity Theft" for details.
If no file exists, you can still file a pre-emptive freeze. In either case, you'll generally need your child's birth certificate and a copy of his or her Social Security card, along with your own suitable identification.
Thanks to new legislation, credit freezes are now free. The new law also requires the credit bureaus to create and freeze a credit file for children under age sixteen upon parental request, regardless of where they live. (Previously, individual state laws covered child credit freezes.)
You'll need a PIN number for unfreezing credit when the time comes, so keep track of it carefully. You may not need it for many years, and it's easy to forget where you stored the information.
Credit freezes don't prevent all kinds of fraud – for example, thieves can still acquire medical care or government benefits under your child's name – so maintain the other precautions even if a freeze has been applied.
Early adulthood is tough enough without the added burden of ruined credit. Do everything you can to prevent child identity theft and give your kids the best financial start possible. They'll thank you for it later.
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