Imagine finding out that your eight-year-old has a house in foreclosure thousands of miles away. How about getting collection calls because your young teen is several payments behind on a car loan? These are not far-fetched scenarios. According to a study conducted by Carnegie Melon's CyLab, over 10 percent of the children studied reported that someone had used their Social Security number fraudulently.
Kids have pristine records with no real credit score of their own. Parents generally don't think to monitor the status of their kids' identity. This is the perfect combination for children to be the easy targets of identity theft.
A child's Social Security number can be used by identity thieves in the same ways as our own numbers can be used -- to apply for government benefits, to open bank accounts, to obtain credit cards, to apply for loans and to secure a rental lease. The main reasons for the use of child identities are to obtain illegal immigration, steal, and clean the credit scores of a loved one. Victimization frequently occurs close to home by family and friends -- data shows that 27 percent of the time, the victim knows the person responsible for the crime and lower income families are disproportionately affected.
When my son was young one of his chores was to bring the mail in from the mailbox. One afternoon, when he was six-years-old, he came running in all excited because he had gotten mail addressed to him. This is always a cause for celebration with youngsters, but this time was different. He was wielding a credit card with his name on it. "Look mom! Now I have a card like you have." I was horrified as I snatched the card from his little hand.
This was back when banks and credit card companies would send out actual, approved credit cards to customers -- all you had to do was call the phone number pasted on the front to activate the account. Even then, six-year-olds were not allowed to have their own cards. This card could have easily fallen into the wrong hands -- many such cards did.
First I had to explain to my son why he would not be keeping his new card, and then call the credit card company to point out their error, and request they did not make further efforts to get my son to open an account. Giving my son his credit lesson was far easier than dealing with the issuing company -- after all, I obviously wasn't my son on the phone. "You don't understand," I was scolded. "Only the cardholder can have his name removed from our records." It didn't matter that I explained that my son was only six. Ultimately, my son had to join the phone conversation and authorize me to represent him.
The government eventually stepped in. The Credit Card Accountability Responsibility and Disclosure Act of 2009 set the minimum age for having a credit card at 21. A student can get a card at 18 with the co-signature of a parent and proof of ability to pay for charges. The companies were also forced to stop practices to recruit students on college campuses with temptations such as a free pizza or a subscription to a popular magazine.
Five Ways to Protect Your Child's Identity and Credit Health
- School forms often require personal information. Ask how the information is collected, used, stored, and disposed of. This sensitive information is protected by law -- make sure that they have a plan to safeguard the information.
- Watch for credit offers mailed in your child's name as this can be an early warning to identity theft. If the offer is from a bank where there is an account in your child's name, ask to be removed from marketing. If the offer comes from another source, check with the company to see how they acquired your child's name.
- If you receive a bill, collection letter or phone call in your child's name -- there's a problem. Don't ignore these red flags, contact the creditor.
- Check to see if your child has a credit report. The reporting agencies generally don't keep reports on minors -- if there is a report, it is a good indicator that someone has been using your child's identity. Teach your older teens to check their credit report annually. Have them do it on their birthday -- this is an easy reminder, and consider keeping good credit as a birthday present to themselves.
- Teach your kids about credit cards and using credit wisely -- start when they are very young and see you using your cards to pay for groceries or toys. Explain that credit cards are not magic and that you get a bill at the end of the month which has to be paid. Start your older kids off with a debit or prepaid card -- think of these as credit cards with training wheels.
There are nearly nine million identity fraud victims every year in the United States. In 2010 the total financial loss attributed to identity theft was over $13 billion. Be vigilant and protect yourself and your children. Credit problems can have far-reaching effects on your child's future, including employment, college acceptance, tuition loans and even home ownership.
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