With more people shopping and banking online, cybercriminals have greater opportunities to steal identities.
The Justice Department estimates 11.7 million people, representing five percent of all persons age 16 or older in the United States, were victims of identity theft between 2006 and 2008. These cases resulted in total financial losses of over $17 billion.
But increasingly, the victims are not adults and are well below the age of 16. A 2012 report by Richard Power, a Distinguished Fellow at Carnegie Mellon CyLab, found children are targeted for identity theft at 35 times the rate of adults.
For example, Power found that Nathan, a 14-year-old from Kentucky, had a credit history that went back more than 10 years. Several credit cards and a foreclosed mortgage were already in his credit profile, put there by someone living in California. The thief established good credit for the first 10 years and was able to finance a $605,000 home in California through first and second mortgages.
When a parent is the thief
But the thief isn't always a stranger. Randy, who works at a car dealership in rural Virginia, says he has seen an increasing number of cases of young people buying their first car, only to find they can't because their credit is ruined.
“We run a credit check and in turns out their parents have used their identities to open credit card accounts, run up huge bills, and don't pay,” he said. “It's terrible. Usually the young person breaks down and cries.”
Experts who follow this sort of crime say parental identity theft accounts for only a small percentage of identity theft cases in the U.S. but concede the numbers are rising. The Federal Trade Commission (FTC) tracks identity theft but does not keep information about how many children have their identities stolen by a parent.
It's easy for a parent to steal their child's identity because they have access to the child's Social Security number. They can also easily intercept mail to keep the child or other family members from discovering what they have done.
Not all parents who steal their children's identity think they are stealing, or doing anything wrong. They fully intend to pay off the debt in a timely matter and think they will be establishing a good credit history for their child. But in addition to being illegal, their good intentions almost always fail and they doom their children to beginning their adult life with bad credit.
The system is also helpful to someone who wants to assume a child's identity because companies that issue credit do not have any way to confirm the age of the applicant. If the applicant using the Social Security number of a four-year old says they are 28, the credit provider usually accepts their word.
The Identity Theft Resource Center (ITRC) says that, while it's understandable how that could slide by in a telephone or online application, few credit issuers request proof of identity in an in-person application process. Even then, many clerks have not been trained on how to recognize counterfeited or altered licenses.
Something that needs to be fixed
“This is a fault within our system that needs to be rectified,” the group says.
The credit reporting agencies also have no way to know that the Social Security number belongs to a minor. ITRC says there is little, if any, sharing of information about the age of a person between the credit bureaus and the Social Security Administration.
The age of the applicant becomes “official” with the first credit application. For example, if the first application indicates that the applicant is 24, the credit agencies believe that person is 24 until a dispute is filed and proven.
Identity thieves know this and it's a major reason that children have become favorite targets. At a minimum, parents should contact all three credit reporting agencies and request a credit report for their child. If you are told that there is no credit report, take that as good news. A credit report should not exist until that child’s first credit application as an adult.
There are also a number of private companies that offer additional steps that they say will keep a child's identity more secure.