Smarter Loans Identity Theft Series (Part 2 of 3) – How Child Identity Theft Affects Credit

Identity Theft  

In Part 1 of the Smarter.Loans Identity Theft Series, the ways in which people are robbed of their identity, signs of identity theft, and actions that victims can take were explored. In this second installment, the financial crime of child identity theft will be covered. As with adults, thieves steal identity from children to get credit like auto loans, mortgages and charge cards in the child’s name, among other reasons. They have no intention to repay, which ruins a child’s credit before it even gets started.


What makes this fraud even more sinister is that it can go without detection for many years, which means the thief can have decades to destroy the credit of an innocent young person. This discussion includes:


  1. Facts and Stats on Child Identity Theft
  2. Why are the Identities of Children Stolen?
  3. What Exposes a Child’s Identity to Theft?
  4. Guarding Child Identities


Facts and Stats on Child Identity Theft

It would be unimaginable for any parent to discover that their child has an automobile repossession in another city on his credit report. Or for a young woman fresh out of college to find out she can’t get an electric bill account in her name because of a huge default from an account opened years ago. Unfortunately, these and other scenarios happen far too frequently. For instance, just one industry report found:


  1. The identity of 40,000 children in the U.S. was scanned and over 10% of the group had their Social Security number used fraudulently.
  2. Children are the main target of identity thieves.
  3. A large number of identity theft victims are under six years old; the youngest was 5 months old.
  4. 1 in 40 American households with children under 18 had at least one child identity theft victim.
  5. The largest ID fraud, committed against a 16-year-old, totaled over $720,000.
  6. Over 75% of the cases of child identity theft occurred prior to a known data breach.


These statistics were compiled from one report performed by an identity protection company. They do not reflect the entirety of child ID incidents in any region, just of the subjects whose identities were scanned in this report. However, the results do provide a small glimpse into the prevalence of this invasive crime.


Why are the Identities of Children Stolen?

Exposure to personal information of children is sometimes due to a mistake such as a computer glitch. In such cases, the parents are informed of the breach and the company works to fix the issue and take action to protect the data. Frequently, child identity theft is a deliberate, hidden violation of a child’s data to be used for illegal activities, such as:


  1. To open secured and unsecured credit accounts
  2. Application for government benefits
  3. In order to open bank accounts
  4. To rent or lease housing or vehicles
  5. For use in organized crime activity


Although most identity thieves are complete strangers to the child, there are also instances when friends and family members use the Social Security number of an innocent child because their own credit is badly damaged. Whomever the perpetrator, the results are the same. A young person can find themselves in tremendous debt with bad credit before they even have the chance to use credit in their own name.


What Exposes a Child’s Identity to Theft?

There are a number of ways a thief can get information to use to steal a child’s identity. Sensitive paperwork carelessly disposed of is common since some thieves will literally dumpster dive for personal information to use or to sell to someone else to use. Giving out a child’s information on computer apps or websites is another path that can lead to identity theft.


Yet two of the primary ways a child’s identity can be stolen are actually mandated situations in which parents are required to provide information. These are the medical and school records of children. With each, the child’s Social Security number, along with birth date, parents’ names, and other private information, has to be provided for a child to be serviced. In the wrong hands, this exposure is a treasure trove for a thief to open credit accounts or do any number of harmful actions which include the risk of health emergencies if a child’s medical record is (mis)used by someone else.


In recent years, agencies that handle private information of children have put compromises in place to lessen the exposure. Some will allow the parent to identify the child by other means or use just the last four numbers of his or her Social Security number. In many regions laws have been passed which let parents sign a release form to delay the use of the Social Security number entirely.


More parents are speaking up and asking specifically why their child’s information is needed. If it is necessary, parents want to know how the agency is protecting, storing, and disposing of the precious data with which they are entrusted. These and other efforts are means to protect children from identity theft.


Guarding Child Identities

Sadly, the world is filled with dangers to children in any number of forms. Identity theft is a real menace but parents can take a proactive stance to lower the risk of their child becoming a victim. Although no solution is a guaranteed deterrent, there are safeguards that can be put in place, like:


  1. Never giving out a child’s personal information to an unknown party. For instance, phone calls or Internet sites that claim to give away free prizes or money.
  2. Learning the signs of identity theft such as denial of a child’s government benefits, notice of multiple tax returns, and unknown collection calls or letters in the child’s name.
  3. Immediately contacting all credit agencies and placing a credit alert on the child’s file if fraud is suspected or detected.
  4. Keeping all electronic and paper records in a safe place at all times. Shredding documents when no longer needed.
  5. Staying on top of all school related documents and policies regarding data storage and sharing. Avoidance of giving out information that is not necessary, especially to entities that are not formally school-sponsored like sports teams and musical groups.
  6. Watching out for red flags that signal a potential ID theft. These include if a child’s wallet or identifying paperwork is lost or missing, a home burglary, or notification of a security breach.
  7. Keeping up to date on laws or regulations that protect student record privacy.
  8. Exercising legal rights when it comes to annual notices that explain the rights of parents with regard to reviewing and disclosing the child’s personal information. This includes participation in surveys.
  9. Opting out of school directories since they are often available to the public or other families.


Violation of a child’s identity has far reaching effects on the emotional and financial well-being of the entire family. For parents to discover their child has been used to illegally sponsor credit or other fraudulent activities (sometimes before they can even read) is devastating. ID theft is a crime that can follow a child into adulthood since credit rating can affect educational opportunities, employment, housing, transportation and more.


The truth is that parents can only do their best to prevent harm to their children at the hand of unscrupulous criminals. Fortunately, child identity theft is in the limelight to the extent that families, law enforcement, and government are taking steps to prevent it from happening, educating the public regarding this crime, and punishing offenders to the full extent allowed.

How useful was this post?

Click on a star to rate it!

Average rating 0 / 5. Vote count: 0

No votes so far! Be the first to rate this post.

We are sorry that this post was not useful for you!

Let us improve this post!

Tell us how we can improve this post?

Smarter Loans Staff

The Smarter Loans Staff is made up of writers, researchers, journalists, business leaders and industry experts who carefully research, analyze and produce Canada's highest quality content when it comes to money matters, on behalf of Smarter Loans. While we cannot possibly name every person involved in the process, we collectively credit them as Smarter Loans Writing Staff. Our work has been featured in the Toronto Star, National Post and many other publications. Today, Smarter Loans is recognized in Canada as the go-to destination for financial education, and was named the "GPS of Fintech Lending" by the Toronto Star in 2019.