Kids face some of the same risks as adults when it comes to identity theft with their information being compromised in data breaches or stolen by others — in some cases by a relative or family friend. According to Eva Velasquez, CEO of the Identity Theft Resource Center, too often, kids don’t even know they are victims until they reach adulthood and try to use their legitimate credit.
Kids are targets for synthetic-identity fraud; one the fastest growing forms of identity crime in the U.S., according to the financial industry and the Department of Justice. Synthetic-identity fraud is when criminals use a mixture of real and made up information to create “synthetic” identities linked to phony credit files. Under these fake identities, they open financial accounts, apply for loans, utility service, jobs and government benefits, get medical care or rent a place to live.
Perpetrators maintain good credit over time to receive higher credit limits and then do what is called a “bust-out” charging the cards up to their limits, paying nothing and discarding the identity. This fraud harms both consumers and the institutions and government agencies criminals exploit. Reporting the crime challenges traditional fraud detection methods because the persona is not a “real individual.”
Fixing the problem
According to Velasquez, clearing a kids name can be just as complicated as it is for adults. “A parent or guardian has the extra burden of providing documentation proving they can act on behalf of a minor legally,” she says. If a family member committed the fraud, it could complicate matters even further because a victim might not be willing to make the necessary law-enforcement complaint.
Don’t ignore the warning signs. Take it seriously and act fast if your kid gets a call from a collection agency or mailings like an IRS notice claiming income taxes weren’t paid, a jury summons or preapproved credit card offers. Check with the three major credit-reporting agencies –- Equifax, Experian, and TransUnion –- to see if a credit report exists for your kid. If it does, freeze it and begin the process of investigating and disputing the information.
The Federal Trade Commission’s IdentityTheft.gov can help you report and recover from identity theft. The ITRC provides free help for identity crime victims.
A proactive step
You can minimize the risk of identity theft by freezing your kid’s credit report. Thanks to a new federal law this fall you will be able to freeze and unfreeze your credit file throughout the country at no cost. You will also be able to get a free credit freeze for kids under the age of 16. When the new law takes effect, Equifax, Experian, and TransUnion must each set up a webpage for requesting credit freezes and fraud alerts.