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ID theft: Use credit freezes to keep your kids, elderly safe from this financial scam

Updated: Oct 14, 2018

To prevent criminals from opening bank, utility and phone accounts in your name, you need more than a credit freeze. Here's what to do. USA TODAY

Amy Wang and her husband spent the first six months of 2016 trying to repair their credit after someone redirected their mail and stole tax forms with sensitive information. A Macy's, Bloomingdale’s and Kmart credit card were all opened fraudulently in Wang’s husband’s name.

The criminals also gained access to her three children’s personal data, including social security numbers.

Now Wang, an occupational therapist in Miami, worries her teenagers’ identities may be in jeopardy, too.

“It took so long to resolve everything else that I don’t want to look for other problems,” Wang, 49, said. “But these guys can hold onto their information and use it any time.”

She has good reason to be concerned.

While children make up a small number of all identity theft cases – more than 1 million minors were victims last year out of 16.7 million – the consequences often are much worse. Child ID victims lose more on average and pay more out-of-pocket costs than adult victims, according to Javelin Research and Strategy, a Pleasanton, California-based research and consulting firm.

But the worst aspect may be the emotional toll. Sixty percent of child ID victims know the perpetrator – commonly a relative or family friend – making it that much harder to resolve their cases. It's difficult because victims may know and love the relative who stole their identity, and to begin repairing a child's credit a police report must be filed that names the suspected perpetrator.

Fortunately, parents and guardians can now freeze their children’s credit for free, arguably the strongest measures to prevent that agony. They can also help their older relatives do it, too.

As for Wang freezing her children's credit? "I'm definitely doing it," she said.

Freezing your child’s credit

Starting Friday, every American by law can freeze their credit reports for free at Experian, Equifax and TransUnion, the three national credit bureaus. Before, it cost people in 23 states $3 to $10 per bureau to freeze their credit report. A freeze prevents lenders from pulling a person’s credit report – a key part of the approval process for a credit card or loan – essentially preventing fraudsters from opening a new account in your or your child’s name.

The new federal law comes just more than a year after Equifax disclosed a major data breach that exposed the personal information of 148 million Americans and prompted lawmakers to rethink identity security.

Children typically don’t have credit reports because they have no loan obligations, so fraudsters use their data to create a fresh credit profile. They build up positive credit histories, paying bills and using credit cards responsibly  until they qualify for bigger credit lines or loans they have no intention to repay.

“They do a ‘bust out’ once they have access to a large amount of credit,” said Eva Velasquez, president and CEO of ID Theft Center. “They don’t pay, then walk away, leaving a 10-year-old with this awful credit profile that’s not theirs.”

The loss, too, often is larger because the fraud lasted longer  because the parents have no idea that the credit card or loan has been taken out and a credit file created in their child's name.

A freeze helps prevent fraudsters from manipulating a child’s credit history by denying access. Before the new federal law, not all parents could freeze their child’s credit, depending on state laws. The process, unfortunately, is more cumbersome than freezing your own credit, which can be done online.

For children under 16, parents or guardians must mail in their requests for a credit freeze. You can find instructions for the credit unions websites:

You must also mail supporting documents to verify your and your child’s identities and that you’re the legal guardian of your child. That can include copies of:·        

  • Power of attorney.

  • Foster care documentation.

  • Your and your child’s social security cards.

  • Your child’s birth certificate or other government document showing parentage.  

  • Your driver’s license or state- or government-issued identification card.

Children who are 16 and 17 must request their own credit freezes online at the three national credit bureaus. In some cases, they may need to mail in copies of a driver’s license or state-issued identification.

Beyond the credit freeze

“Knowing that the biggest threat for child identity theft comes from inside the family or friend group, you want to take other steps,” than just a credit freeze, said Al Pascual, head of security and fraud for Javelin.

First, secure the child’s personal information. Birth certificates, social security cards, passports and other documents with sensitive information should be locked away. Access should be limited and only to those you trust. Similarly, don’t tell your child their social security number until they are old enough to need it themselves and understand the importance of security.

Monitor your child’s online activity and teach them safe practices, such as using secure passwords and keeping certain types of information – like birth dates – private.

Review any financial accounts they may have for any suspicious activity, such as savings accounts and 529 education plans. Pull their credit report once a year, even if it’s frozen, just to make sure there’s no odd activity.

Keep an eye out for signs that your child’s information is being used fraudulently, such as billing statements or collections letters in your child’s name, or preapproved credit card or other financial offers addressed to your child.

If you suspect your child’s identity has been stolen, you will need to file a police report and contact the three credit bureaus. The ID Theft Center also offers free resources for victims through its website and call center at 888-400-5530.

Protect your older relatives, too

Besides your children, it’s important to encourage aging parents to take steps to protect their identities. Seniors are often targets of an array of scams. Elderly parents also depend on more people such as caregivers or staff at assisted living facilities who may have access to their personal information, Velasquez said.

The new law allows guardians to place credit freezes on a protected person’s credit reports for free as well. Anyone who has legal responsibility for their older relatives’ finances should do this. If the seniors in your life still pay their own bills and organize their finances, you can still encourage them to take this step.

“If it’s daunting because they don’t have access to or know how to use the internet,” Velasquez said, “you can still hold their hand through that process.”

The U.S. Senate Commerce Committee grilled tech giants like Yahoo and Equifax over the recent data breaches. USA TODAY

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