Guest blogger John Sileo: Are you as protective of your kids as I am of mine? My wife and two highly spirited daughters are more than just the center of my universe -- they are the compass by which I set my course in every aspect of life. If something is not good for the family, then it isn't good for me. And that means that I want to do everything in my power to keep them safe.
You and I are called upon to protect our children from many things, starting in the womb. Even before they are born, we practice good preventative care. We take specially designed prenatal exercise classes, coax ourselves to eat right for their benefit, learn CPR and Love and Logic and screen regularly for signs of trouble. Once they are born, we provide the best nourishment, the finest medical care, ample playtime, rest and an infinite flow of unconditional love. You get the point: We do everything in our power to prevent complications and give our kids the best chance to grow up healthy, happy and in harmony with the world around them. That is our responsibility, our purpose and our joy. But how often do we check their credit reports?
Their what?! I can hear your questions now: "Check my kid's ... credit report? But she's only 7! She doesn't even have her front teeth yet, let alone a credit card! There are so many years to go before we need to worry about that. Right?"
Unfortunately, no. Because children have untouched and unblemished credit records, they are highly attractive targets. Thieves steal a child's identity early on, nurture it until they have a solid credit score and then abuse and discard it. All an identity thief needs to ruin your child's bright financial future is her name and Social Security Number.
"Shouldn't my child's age show up on any credit background check, and shouldn't the merchant recognize that the person in front of them buying a car on credit isn't 7 years old?" you may ask. Yes and yes, but the people screening the credit report rarely give it the time and care necessary to detect fraud. All too often, background checks involve simply matching the name and the Social Security Number provided. This leaves doors wide open for scandalous minds to wreak havoc on your child's perfect credit.
The most unsettling part is that the age of the applicant (in this case, the person posing as your child) becomes official with the credit bureaus upon the first credit application. This makes clearing a sabotaged credit record even more difficult, because you have to prove to the credit bureau that your child is only 7 and isn't responsible for thousands of dollars of debt. In no time at all, your child could have a maxed-out credit card, unpaid bills and a huge mortgage for beachfront property across the country. You might not discover the illegal purchases until your child opens a bank account, applies for a job, tries to get a driver's license or enters college. At that point, you are left with the time-consuming dilemma of cleaning up someone else's fraudulent mess. If only clearing up a credit report was as easy as cleaning up after your kids!
Do the gaping holes in our current credit system and the audacity of criminals leave you enraged? Me too. And it is imperative that you use your anger as fuel to protect and prepare your children's futures before it is too late. Child identity theft is the fastest growing sector of the identity-theft "industry," and the numbers are staggering. Although it's difficult to estimate exactly how many children lose their identities (since the crime can go undetected for years), the FTC states that 5 percent of identity-theft cases target children, which translates to 500,000 stolen child identities per year. The Identity Theft Resource Center found that in 54 percent of the cases, the child whose identity was stolen was under the age of 6.
More bad news: Identity thieves aren't always strangers. In many cases, it's a relative with bad credit who takes advantage of a child's pristine credit. Conveniently, these family members generally have access to the information necessary to maximize the fraud with little attention. This seems absurd, but imagine a parent who is strapped for cash, has a bad credit score and needs to buy groceries. In this case, short-term thinking blinds the relative or friend to long-term consequences. In other instances, the child's future is not taken into consideration at all.
Frankly, it doesn't take much to get the crime underway; all a criminal needs is the child's name and Social Security Number. These pieces of personal information are exposed in a variety of ways:
- When registering for daycare, schools and recreational sports
- On medical, dental and hospital records
- When joining organizations like the Girl Scouts, Boy Scouts, etc.
- When the information is permanently stored and accessed by volunteers or employees
- When one of the above organizations is breached by a hacker or malicious software
- When an adult befriends your child on a social networking site (MySpace, Facebook) and eventually socially engineers private information out of them
Child identity theft generally falls into one of three categories:
1) Financial identity theft occurs when the name and Social Security Number is used to establish new lines of credit.
2) Criminal identity theft happens when the criminal uses the child's identity to obtain a driver's license or substitutes the child's identity if caught in a criminal act.
3) Identity cloning entails using a child's identity (via information collection or a black-market "purchase" of personal information) for financial, criminal and governmental purposes. The most common form of cloned identity theft is committed on behalf of undocumented workers looking for an identity that will keep them working in this country.
For parents, cleaning up the disaster of identity theft for their children is costly and incredibly time-consuming. Getting a new Social Security Number is almost impossible, and rarely the best option. Taking steps right now to protect your child from this horrible crime is one of the greatest investments you will ever make in their financial and emotional future. Acting now will protect your children from these consequences common to child victims:
- Starting adulthood with a credit rating low enough to scare away the hungriest of loan sharks
- Being denied a first loan, credit card or apartment rental because of a crime committed 10 to 15 years earlier (the passage of time makes this crime very hard to clear up)
- Being denied access to college or a new job
- Having a warrant out for her arrest for crimes that she didn't commit
In the same way that you can't protect your children from every bruise and scrape, you can't entirely remove the risk of identity theft. You can, however, prevent or soften the fall if it does happen. Take these steps first:
- Stop giving out your child's personal information. Until you are confident that it is absolutely necessary to receive the services desired, withhold their personal information. More than 80 percent of organizations that ask for your child's Social Security Number don't actually need it to establish services.
- If you must give it, ask them how they will use it, how long they will keep it and how it will be protected while they have it.
- Never carry your child's SSN with you.
- Order a free credit report for your child at least once a year. All three major credit reporting bureaus (Equifax, Experian and TransUnion) offer one free credit report per year per individual. Order one for your child at the same time you order yours and review them both for any red flags indicating fraudulent activity. I recommend that you order the first one (Equifax) right now; order a second report (Experian) in four more months; order the third report (TransUnion) four months after that and then repeat the process the following year.
- For a more convenient option, use an identity-monitoring service for you and your family.
- If you find evidence of fraudulent activity, contact the police, the source of the fraud and all three credit bureaus. Filing a police report helps to establish your child's innocence in an official way. Have the credit bureaus FREEZE your child's credit for maximum protection. Keep detailed records of all correspondence between yourself, the police, the merchant and the credit bureaus. It will come in handy should you ever find yourself in court, as I did.
- Educate your children on the importance of protecting their personal information. Teach them about the value of their personal information: their name, address, phone numbers, e-mail address, Social Security Number and any passwords and PIN numbers. Reinforce that they own their private information and that it should not be shared with friends, over the Internet or with anyone whom they don't know or trust. Education is absolutely the best financial gift you will ever give to them.
Because you love and protect your children as much as I do, you should start this process immediately. In the case of child identity theft, an ounce of prevention is worth a lifetime of financial security. Don't let the center of your universe become just another statistic.
John Sileo is the award-winning author of "Stolen Lives," "Privacy Means Profit" (Wiley, August 2010) and the "Facebook Safety Survival Guide." He is a professional financial speaker and America's leading identity-theft expert. His clients include the Department of Defense, the FTC, the FDIC and Pfizer; his recent media appearances include "60 Minutes." Learn more about him at www.Sileo.com and www.ThinkLikeaSpy.com.