How to Avoid Child Identity Theft

By Dan Benson, CFP.

Did you know that identity theft is a very real threat to your child or grandchild’s financial future? Especially in this digital era we live in.

According to Javelin, child identity theft affects one out of every 50 minors in the United States – costing an average of $1,128 for a single household.¹ That cost breaks down to, on average, $752 for the fraud itself and $376 out-of-pocket to get the issue resolved.

Trying to undo child identity theft can be a major headache. The repercussions of this crime can be long-term, impacting someone’s future for years. But the scariest part about child identity theft is that it can go undetected for years, or until the child goes to apply for a credit card, apartment, or student loans. This is because parents usually don’t monitor the credit of a minor the way they do with their own financial activity.

We want to help you gain an in-depth understanding of this crime, how to detect it, preventive steps your family can take. We will guide you through the necessary steps if your child’s identity is compromised and discuss the aftermath of child identity theft, providing additional support resources for affected families.

What Is Child Identity Theft?

Child identity theft is when someone takes a child’s personal information and uses it to commit fraud.

According to the Federal Trade Commission, the identity thief might use your child’s Social Security number, name and address, or date of birth.² They want to use the stolen information to:

• • open a bank or credit card account
  • apply for a loan
  • apply for government benefits, like health care coverage or nutrition assistance
  • sign up for a utility service, like water or electricity
  • rent a place to live

The best way to prevent this from happening to a child is heightened vigilance from the adults in their life.

Detection and Prevention of Child Identity Theft

As child identity theft continues to rise, it’s crucial for parents and guardians to recognize the warning signs and implement necessary precautions to safeguard their child’s personal data.

Proactive measures like regular credit report checks, securing personal and critical documents, and online safety education are crucial.

For example, make sure the minors in your home understand the serious risks of sharing information online. If possible, consider using parental controls to monitor and limit their online activity.

Another tip from the FTC is to be wary about who you trust with your child’s Social Security number. For anyone who requests this information – including their school – you should ask these questions:³

1. Why do you need it?
2. How will you protect it?
3. Can you use a different identifier?
4. Can you use just the last four digits of the Social Security number?

When you have documents that contain your child’s personal information, be sure to keep them locked in a safe place. Once you’re done with those documents, shred them thoroughly or dispose of them at a local shred day.

Here at Beacon, we proudly offer a shred day event free to the community every spring.

Warning signs of child identity theft:

• • Unexplained financial activity in your child’s name.
  • You are denied government benefits (like healthcare, nutrition assistance, or student loans).
  • Your child is receiving pre-approved credit offers or loan applications.
  • An IRS notice about unpaid taxes in your child’s name.

What to Do If Your Child’s Identity is Stolen

Child identity theft can be stressful. If your child’s identity is unfortunately stolen, acting fast can minimize potential damage. Here are the steps you should follow:

1. Report the child identity theft: Alert the three major credit bureaus and request a credit freeze for your child’s Social Security number. You can also file a complaint with the Federal Trade Commission (FTC).
2. Restore your child’s identity: Gather all necessary documents and contact relevant agencies to correct any fraudulent accounts or information associated with your child’s identity. Regularly monitor your child’s credit reports to detect any new fraudulent activities.
3. Freeze your child’s credit: A credit freeze restricts access to their credit file, making it harder for thieves to use their personal information fraudulently. (You can actually do this proactively to prevent child identity theft, too.)

Keep detailed records of all your communications throughout this process.

Resources and Support for Child Identity Theft

If you suspect your child is a victim, several organizations can help you navigate the complex process of handling child identity theft and safeguard your child’s future.

The Identity Theft Resource Center (ITRC) offers free resources to help parents understand and act on child identity theft. The Federal Trade Commission (FTC) provides comprehensive information on child identity theft, including prevention tips, reporting procedures, and resolution strategies.

If you have questions about identity theft protection, financial strategy or would like our free assessment of your retirement plan, please contact our firm today. We are here to help you feel confident in you and your family’s legacy.

The Consumer Financial Protection Bureau (CFPB) provides guides and resources on protecting your child’s social security number and financial identity, along with steps to take if you suspect identity theft.

The U.S. Department of Justice offers information on child identity theft, including prevention tips and steps to take if your child’s identity is compromised.

The National Center for Missing & Exploited Children (NCMEC) provides resources for parents and guardians on protecting children from identity theft, including educational materials and steps to report and recover from identity theft.

The Internet Crime Complaint Center (IC3), a partnership between the FBI and the National White Collar Crime Center, allows you to report identity theft, including child identity theft, and offers resources on how to handle it.

These resources offer valuable information and assistance on how to protect against, detect, and recover from child identity theft. As you consider your estate planning and legacy, it is a caring act to be proactive in warning your family about child identity theft.