When identity theft hits adults, it can be a long and frustrating battle to restore their good name.
But imagine the confusion that ensues when a young adult tries to get a credit card for the first time only to find out he has several delinquent accounts in his credit file, some dating back to when he was just a toddler.
Identity theft of minors isn't child's play. It can mean big money for criminals who, by targeting children, have a blank credit canvas on which to wreak havoc. The thieves steal a child's personal information — such as a Social Security number — and then proceed to build a credit profile capable of duping lenders for years.
Or, even worse, someone close to the child — a parent, aunt, uncle or family friend — uses the minor's data to get credit cards, cellphones or utility accounts in the minor's name. This, too, can go undetected for decades.
Last year, more than 1 million children were victims of identity fraud, according to a new survey by Javelin Strategy & Research. The survey was sponsored by Identity Guard, an identity-theft protection service, and conducted online with 5,000 U.S. parents and guardians.
An overwhelming majority (66 percent) of the young identity-theft victims were under 8.
"We're all much more cognizant of the risks that we face as adults, and it's harder for us to understand why it would happen to a child," said Al Pascual, Javelin's senior vice president of research and head of fraud and security. "But we need to recognize this is a very real problem."
When compared with adults, the incidents of child identity theft are relatively small, with just under 2 percent of minors becoming victims. Yet Javelin put the losses in child identity theft at $2.6 billion last year.
"With few exceptions, children under the age of 18 should not have a credit file," said Equifax spokesperson Nancy E. Bistritz-Balkan. "Minors are not eligible for credit cards, mortgages or other loans — items that would appear on a credit report."
On average, fraudsters were able to steal $2,303 exploiting the identity of a minor, more than twice the mean fraud amount for adult fraud victims, according to Javelin. The schemers often create a "synthetic" identity, which combines real data with fake information.
And who would do this to a child?
While only 7 percent of adults fall victim to fraud committed by someone they know, 60 percent of child fraud victims have a relationship with the perpetrator, Pascual said.
Familial fraud is tough on children, who find out as adults that they've been victimized by a relative. Who wants to turn in his or her mother, who might have committed fraud just to make ends meet?
"You want to keep the lights on. You want to keep a roof over their heads," Pascual said. "It's not justifiable, but it's understandable."
Now comes the question of what do to if you discover your child's identity has been stolen.
Act right away. Contact the three major credit bureaus — Equifax, Experian and TransUnion — to see if a credit file exists. If so, put in place a security freeze (also known as a credit freeze) on all the credit files, which prevents lenders from pulling your child's credit report.
"We understand parents may want to take preventive steps to protect their child's personal information," said David Blumberg, senior director of public relations for TransUnion. "However, a proactive file freeze is a drastic solution that we only recommend when a child's identity is being used fraudulently. Fraudsters have used the file freeze process as a way to create a file, when one did not exist, and then use it to perpetrate fraud against a minor."
Only 29 states allow parents, legal guardians or other representatives to place a freeze. The National Conference of State Legislatures (online at ncsl.org) has compiled a list of states that allow a security freeze for a minor. On the site, search for "security freeze state laws."
If you can't get a freeze, regularly monitor your child's credit reports. Go to annualcreditreport.com to get free reports every 12 months. Be sure to contact all the businesses where you see fraudulent accounts. File a police report. This can be a hard decision for adults if the perpetrator is a parent.
"Be vigilant for suspicious activity, like mail addressed to your child containing bills or financial offers," Blumberg said.
Warn your children about sharing personal information online, says Melba Amissi, senior vice president and chief risk officer at Identity Guard.
The Javelin report is yet another reminder that our personal information has become a hot commodity that can cause chaos when stolen — even for our babies.