Child identity theft: Costly, time-consuming and more common
Studies by Javelin, Experian show fraud against minors has long-term consequences
Covers fraud, families, and erasing debt.
Young adults often struggle to obtain credit due to a lack of borrowing history, but many are also hindered by identity theft that happened when they were kids.
A recent study by Javelin Strategy and Research shows a growing number of young adults have a troubled credit history because they’ve been victims of identity theft. And resolving this theft costs time, money and lost opportunities.
More than 1 million children – nearly 1.5 percent of minors – were affected by identity theft in 2017, according to Javelin’s “2018 Child Identity Fraud Study.” And another survey by the credit bureau Experian shows many young identity theft victims still deal with the consequences more than a decade after the fact.
A child’s data is a clean slate for thieves
Massive data breaches are more of a problem for children than adults because identity thieves are more likely to steal data belonging to minors. Among those of all ages who were notified their personal information was breached, 39 percent of children later became victims of fraud, compared with 19 percent of adults, according to Javelin.
Children are attractive victims for several reasons. Their personal identifying information can go for years before being detected, said Michael Bruemmer, vice president of consumer protection at Experian.
The child’s financial identity represents a clean slate for scammers looking to play a long game by building a fake credit identity over time and then taking advantage of the available credit in the future.
Unlike an adult, a child is not trying to access his credit by applying for a loan, opening a credit card account or seeking to rent an apartment, and often doesn't discover the fraud until adulthood.
Two-thirds of child identity theft victims are under 8, per Javelin. Twenty percent are aged 8-12 and 14 percent are aged 13-17.
Fraudsters stole an average of $2,303 when they lifted the identity of a child, more than twice the mean fraud amount from adult victims. Adult victims also usually pay less to resolve the fraud – $104 out of pocket compared to $541 out-of-pocket for fraud victims under 18 and their families.
See related: Main lesson after Equifax breach: Protect yourself
Unexpected culprits: Parents and family friends
Perhaps saddest of all is that children are often betrayed by people close to them. Only 7 percent of adults are victimized by someone they know, Javelin’s study revealed. But 60 percent of victims under 18 know the fraudster.
The data also showed 33 percent of parents or guardians blamed their child’s identity theft on a family friend and 22 percent blamed the theft on someone in a parental relationship with the child such, as the other parent, stepparent or parent’s partner or significant other.
“ID theft often occurs when parents are in a tight spot financially and decide to use their child’s Social Security number to open up a new line of credit since their own score is too low,” said John Heath, directing attorney at credit repair firm Lexington Law. “In this case, a child often doesn’t find out until they’re an adult and trying to get a loan for a house or a car, only to discover their credit has been trashed.”
Identity theft issues can take years, massive effort to resolve
Preventing and prosecuting identity thieves who prey on children is a challenge because the fraudsters often have legitimate or easy access to the child’s identifying information. Additionally, the victims may feel conflicted about going after family members and adult friends.
No matter who committed the theft, resolving the issue can take weeks, months and even years.
According to Experian’s report, “Aftermath of Child Identity Theft: A Survey Among Victims,” one out of four victims is still dealing with issues related to identity theft more than 10 years later. And 81 percent worry about their ability to obtain credit.
“The toughest ones to fix are the ones involving children, medical ID theft and tax ID fraud,” Bruemmer said. “It could take days. It could take months. It could take over a year depending on how many accounts were opened.”
Even more challenging to resolve is synthetic identity theft – combining personal identifying information from two or more people to create a new identity.
“Whether they take legal action or not, the unfortunate fact is that once a young adult has been victimized by identity fraud, it can be uniquely difficult for them to clean up the related mess,” said Doug Pollack, chief marketing officer with ID Experts. “If debts use their Social Security number but are not in their name, it can be very challenging to get them discharged and unassociated with the innocent victim.”
Failure to act could bar the victim from obtaining credit
A prospective borrower typically needs a FICO credit score of 700 or higher to qualify for the best loan terms and credit card offers. But an identity theft victim who hasn’t yet resolved all the resulting issues could be mired with a credit score in the low 600s or worse, Heath noted.
Fifty-two percent of respondents in Experian’s survey were later denied credit because of issues stemming from identity theft. And 35 percent needed counseling specifically because of the identity theft.
How to protect your child from identity theft
Vigilance is key to protecting a child from identity theft. Javelin’s study revealed that only 0.7 percent of dependents of highly cautious parents or guardians were victims of identity theft in the past 12 months, compared to 4 percent of less cautious guardians. These cautious parents teach the basics of online safety and financial management to children as young as 7 and wait until their children are in their mid-teens to allow unrestricted internet access.
Here are some other steps you can take to prevent your child from being targeted by thieves:
- Check your child’s credit report, if one is available. A child shouldn’t have a credit report unless you have opened legitimate trade lines for him, such as an authorized credit card user account, or if someone else has fraudulently opened accounts in their name. If your child does have some sort of trade line, or you want assurance that he hasn't been targeted by an identity thief, contact the three major credit bureaus – Equifax, Experian and TransUnion. Each has specific steps you can take to check your child's credit. Note that the credit reporting agencies do not knowingly record data on people under the age of 13.
- If your child has a credit report, freeze it. A credit freeze restricts access to your credit report, which makes it difficult for identity thieves to open new accounts in that name. As of Sept. 21, 2018, freezing and unfreezing your credit is free in all 50 states. And parents are allowed to freeze the credit files of children under 16.
- Don’t give out your child’s Social Security number. Keep your child’s Social Security number private, even if an organization requests it. If you’re filling out a form for your child that asks for this information, just leave it blank. Likely, no one will even question you.
- Use free monitoring tools. Experian offers a free, one-time Child ID Scan that can help detect child identity theft and fraud.
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