Last updated in August 2012
With more than 11 million consumers victimized in 2011, identity theft is one of the top crimes in the U.S. In previous articles, we’ve urged you to monitor your credit for signs of identity theft by using AnnualCreditReport.com once a year to obtain for free your credit reports from the three major credit bureaus.
In addition to keeping tabs on your own credit, we advise you to periodically make sure your children’s identities haven’t been stolen. Theft of children’s identities is growing at an alarming rate.
Criminals like to steal kids’ identities because they provide them with clean credit slates. And because most parents don’t think to check their children’s credit histories, thefts can continue undetected for a long period of time. But what really makes stealing kids’ identities attractive to criminals is that once thieves have valid Social Security numbers for them, there’s nothing in place to prevent their crimes.
When a consumer applies for credit, his or her Social Security number, plus other identifying information, usually is provided to one or more of the three major credit reporting agencies to obtain credit scores and other data.
Here’s the problem: The credit reporting agencies don’t create credit files for individuals until they apply for credit. And the credit reporting agencies don’t have access to important information they could use to verify that the supplied data, such as birth dates, are accurate. If a bad guy applies for credit using your four-month-old daughter’s Social Security number and a falsified birth date, the credit reporting agencies don’t know the birth date is incorrect. So they initiate a new credit report for your daughter using the information provided by the thief. Congrats: You’re now the proud parent of a defrauded baby.
You can find out if your kid has been victimized in this way by monitoring the child’s credit status using AnnualCreditReport.com once a year to request free credit reports on your child from the three major credit bureaus just as you would do for yourself. There should be no report for the child unless someone—presumably a fraudster—has used the child’s identity to request credit.
If you find that there is unexpectedly a credit report for your child, you can immediately freeze the child’s credit until the child is old enough to need it. Most states, including Massachusetts, have laws that require credit reporting agencies, if requested by consumers, to place freezes on the consumers’ credit reports. If you have a security freeze placed on your credit record and anyone—including you—applies for credit using your personal information, the credit reporting agencies notify the creditor, which hopefully denies credit to the requestor. Massachusetts residents pay a $5 fee to initiate or remove these security freezes; the fees are waived for victims of identity theft.
It would be nice if you could place such a freeze on a child’s credit before the child is victimized. But the credit reporting agencies aren’t required to freeze credit reports until a report actually exists, and no report will exist until the child, or someone using the child’s identity, has applied for credit. That means there is nothing to freeze until the child has been victimized.
State governments could step in with new laws to close this ridiculous gap in consumer protection. In May, Maryland enacted a “child identity lock” law, which starting in 2013 allows parents to freeze their children’s credit at any time, even before agencies start their credit reports. Consumer advocacy groups hope Maryland’s law will push the credit reporting agencies to make this option available to parents in all states and, if not, that it will be used as a model for other state legislatures.
While we hold our collective breaths and wait for other states to follow Maryland’s lead, you can take some steps on your own to be at least alerted to possible fraud. First, as we’ve suggested, order credit reports for each of your children once a year through AnnualCreditReport.com knowing that, if your children have never applied for credit, the agencies should have no files on them.
Second, periodically check with the Social Security Administration to make sure no one is using your child’s identity to report income.
In addition, you can perform many tasks to safeguard your family members’ credit records. Use a paper shredder to destroy mail that includes Social Security numbers, birth dates, and account numbers. Keep vital documents such as Social Security cards and birth certificates locked up in a safe place; never carry them in your wallet or purse. Supply Social Security numbers only when absolutely necessary. When online, create and use strong passwords (see our article on using safe passwords). There are also several steps you should take to safeguard your computer from attacks (see our article on maintaining and securing your computer).
We advise against paying for credit monitoring services, which typically cost $15 to $20 per month per person. These services provide no protection from identity theft because they detect fraud only after it has occurred, rather than preventing it in the first place. This advice also applies to buying monitoring services for your kids.