Shortly after children are born, parents apply for the Social Security number that their children will use throughout their lives. Unfortunately, that leaves criminals with a golden opportunity to use that Social Security number to commit fraud – since you are unlikely to check the credit status of your own children.
"Child identity theft is a huge problem," confirms Steve Weisman, a lawyer, author, and professor at Bentley University. "Children are far more likely to become victims of identity theft and you think, 'Well, who wants a child's identity? You know, they don't have great credit.' But what happens is the criminal gets clean credit with a child. They can then build up a phony credit report in the name of that child and then go for some large credit. They don't pay it back and often the child doesn't become aware of this until they're going for student loans or a car loan or something like that."
The fraud can go undetected for years and cause damage that is hard to erase by the time your child is ready to open his or her own accounts. Some warning signs that your child's identity has been stolen include:
- Calls and Solicitations – Your child receives pre-approved credit offers or bills from various vendors in the mail in his or her name or gets phone calls from card companies or bill collectors. Government agencies may call asking you to verify your child's non-existent employment.
Innocent credit card solicitations are not unheard of, but anything directed to your child that deals with finances is worthy of review. Don't automatically blow it off as a simple mistake.
- IRS Notifications – You could be notified that the Social Security number you filed for your dependent child on your return is listed on a different return – or worse, that your child failed to pay taxes on fraudulently reported income.
- Denials – You file for a government benefit only to discover it is being paid under your child's Social Security number to somebody else, or your child cannot get a driver's license because the number is already in use.
Surprisingly, according to a 2018 report from the credit reporting agency Experian, one-third of the child identity theft victims knew the person that stole their identity. Theft involving parents, other family, and friends is not only heartbreaking; familiar fraud is extremely difficult to prevent.
What can you do to be proactive? Here are a few ways to limit the risk.
- Closely Protect Personal Information – Do not carry your child's personal information, such as a Social Security Card, with you. Keep it under lock and key, and be sure you understand how anyone who does need the information protects it, such as schools or medical facilities. Privacy laws apply in those cases; make sure they are being followed.
Keep all of your computers updated with the latest firewall and anti-virus protections and avoid clicking on unsolicited e-mail links – they may be phishing scams.
- Help Your Child Understand the Risks – As your child gets older, they will be in more situations where they will need to provide information – and through social media, where they may choose to share information. "The challenge with identity theft in today's day and age is we are an online culture," says National Financial Educators Founder and Chief Education Officer Adam Carroll. "I think most Americans would be astonished to know how many places actually have their Social Security number. We've seen breaches left and right ... and so all of our information is out there." Help them to understand the risks, especially with their Social Security number, and that if they are not sure that someone needs to know that information (including family members) to check with you first.
If they are online, show them how to verify secure websites (the address bar contains a "https" header and a lock icon), remind them to not send secure information over public or unsecured wireless (and secure your own), and to use difficult passwords and protect them. Of course, it is up to you to set a good example and do the same thing.
- Dispose of Information Properly – Just as you should with your own information, shred any trash that contains information that could be useful to an identity thief. Remember to wipe completely any electronic files that could have similar information, such as an old computer or obsolete cell phone, before recycling or disposing of it. "Everyone should have a shredder," emphasizes Carroll. "As simple as that sounds, every single credit card application, every single bank statement, every single thing that comes in that has even your address on it should be shredded. And the reason for that is there are people who are going out, and they're figuring out ways to grab your information, whether it be your address, your Social Security number, your checking account information, whatever it may be, and they're using that to create accounts in your name somewhere."
- Freeze Your Child's Credit – As of September 2018, it is free to freeze your child's credit, which prevents identity thieves from opening new accounts or obtaining new credit in your child's name. "Now anyone anywhere can freeze the credit reports of their kids," says Weisman. Each credit reporting agency produces its own report, so your three reports might not contain all the same information. Therefore, it's important to obtain a copy of each and review it on a regular basis. You can see your three credit reports today as part of a free MoneyTips trial.
If you have evidence of identity theft — or are reasonably suspicious that it has taken place — you should immediately contact the credit reporting agencies (TransUnion, Experian, and Equifax) to find out if an account has been taken out in your child's name. If it has, begin the process to repair the damage.
Additionally, the ITRC (Identity Theft Resource Center) has an excellent summary in their Info Sheet, "Child Identity Theft," that is available at their website under the "Victim Help" section.
It is important for you as a parent to be vigilant about your child's information and protect him or her from identity theft. Getting through adolescence is tough enough without having a destroyed credit rating and false accusations waiting for you in adulthood.
Protect your credit – protect your identity – protect yourself with a free MoneyTips trial.