Child Identity Theft

Credit card applications for the immature

How would you feel if someone could use your personal information to acquire a business license for a contracting company that you've never heard of? Or, better yet, how would you feel like having $14'000 in debts along with 17 credit cards by the time you graduate junior school and what's worse - not be aware of it?

Apparently, these are just the two out of hundreds of cases that were reported. According to Federal Trade Commission, child identity theft is booming. More than 5% of all the complaints received regarding identity theft were from individuals younger than 18. That's 2% higher comparing to the previous year.

The current process of applying for credit cards is so simple that even a 5 year old could do it. This is where major problems start. Financial institutions require minimum information to issue cards. But once a criminal gets a hold of someone's ID, like social security number, they are in trouble.

This has been a problem long before first credit cards were issued. The fact that someone can live under your name by simply obtaining your social security number is frightening. However, identity thieves have gotten even more sophisticated.

Today, when even a toddler can get a social security number, the problem of identity theft has gotten even more critical. Parents, who are willing to be eligible for a tax deduction, have to get social security number for their kids. There is also the Enumeration at Birth program that simplifies the process.

However, financial institutions do not begin tracking one's credit history until the first credit account is opened. Parents and children rarely check whether credit reports already exist. Not only such opportunity provides a thief with new credit history, it also gives him plenty of time to open bank accounts, get licenses, apply for credit cards and stay undetected.

On the other side, a lot of financial advisors recommend providing an early start on credit history. According to them, this will enable children to get better terms when dealing with credit cards and loans in future.

But criminals aren't the only ones who have been involved in such practice. There have been cases of parents illegally using their children's information. Once they find themselves deep in debts without being able to obtain more loans due to bad credit history, parents forge documents and use social security number of their children to obtain even more loans.

When analyzing the source of the problem, one can note the significance of social security number. This piece of information is used in almost every activity where person's ID is required. On one side, such method provides simplicity when registering for services. On the other side, this gives identity thieves better chances of acquiring person's details.

So, seeing the scale of the problem, what one should do to prevent child identity theft? First of all, there are services that offer protection against identity theft. Such services place fraud alerts on the client's credit report, which can later be renewed by the client once every 3 months. Secondly, a parent can put a credit freeze on their child's report. This way criminals will be unable to obtain new credit or new loans. Such "lock" can then be removed by client's request.

To put it briefly, financial activity requires a lot of responsibility. Parents themselves determine the maturity of their child. So, if a child is not allowed to vote, join army or drink, is he mature enough to borrow money? Credit report plays a major role in our adult life. Therefore, keeping an eye on your child's credit report would be a wise idea.

Bryant Park

Bryant Park is a financial consultant for one of the companies listed on Wall Street. He writes on a variety of topics ranging from credit cards to different loans that can be availed by consumers. He holds a bachelor degree in Financial Services from Dartmouth College.