How to protect against child identity theft

As adults, we’ve all heard about the financial damage identity theft can do. But do we also need to worry about protecting our kids’ identities from thieves?

A Growing Crime

Approximately 140,000 identity frauds are committed against children each year. The rate of identity theft for children is 35 times higher than the rate for adults—and growing. In 2014, the Interstate Technology & Regulatory Council reported a 300 percent increase in calls related to child identity theft.

Why Thieves Target Kids

Child identity theft happens when someone steals a child’s personal information, often a Social Security number (SSN). The thief uses it to open credit cards, secure loans or engage in other criminal activity.

How They Get Away With It

Criminals can derail a child’s life in just three steps:

1. The thief steals a child’s information. The thief uses data breaches/hacks, computer viruses or email phishing to access a child’s information, usually a SSN.
2. The thief establishes a credit history. The thief typically tries to open an account with minimal credit history requirements—such as a cell phone, utility or unsecured credit card account—using the stolen SSN with a different name and date of birth.
3. The thief builds up credit, and then cashes out. After the first account is set up, the thief can set up higher-value accounts, each account growing in size. When ready, the thief cuts ties with the identity, allowing any open accounts to go into default.

The Impact on Children

Most people are familiar with the financial cost of identity theft. There’s also a huge opportunity cost. Restoring a child’s identity can take years. In that time, child identity theft victims could be denied student loans, scholarships, internships, jobs, credit cards or housing.

What You Can Do

There’s a simple tool you can use to protect your child’s identity: a credit freeze. Maryland law requires that credit agencies allow parents to create a credit report for a child in order to freeze the account. The sooner you freeze your child’s credit, the lower the risk for identity theft. Why it works? Creditors cannot access an account that is frozen. Without a credit report to support an application, creditors are highly unlikely to approve and open an account for anyone who tries to use your child’s SSN.

To freeze your child’s credit, submit a freeze request online or in writing to the credit agencies. Learn how to do it.

Know the Warning Signs

How can you tell if your child’s identity is stolen? If any of these red flags sound familiar, the Federal Trade Commission (FTC) urges you to act immediately:

• Unusual calls, bills and offers for your child. You may receive calls from collection agencies. bills from credit card companies or service providers; credit card offers; or even bank account checks—all in your child’s name.
• Employment confirmation requests. The IRS, Social Security Administration or other government agency may ask to confirm that your child is employed, even though she is not or never has been.
• IRS notifications. The IRS may notify you that the information you filed for a dependent child is already listed on another filer’s tax return. Or, your child may receive a notice that he has failed to pay taxes on income that he never received.
• Denied benefits. If your child or your family is expecting to receive government benefits and is denied, it may be because another account is using your child’s SSN to receive benefits.

Visit the FTC website to learn what to do.

Sources: Maryland Hospital Association; 2012 Child Identity Theft Report.