Identity Thieves Are Targeting Our Kids! What Parents Must Know

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Identity theftIt all began with a credit card application.

"My first application came back denied," Olivia McNamara remembers. "I tried another bank, but that one came back denied, too." A recent high school graduate, McNamara was trying to establish a credit history -- and prepare for college -- by getting her first student charge card. Unfortunately, the banks weren't cooperating.

"There was no reason for my applications to be turned down," she recalls. "I called credit bureaus, but they were no help."

Linda McNamara, Olivia's mother, had recently been stung by an information security breach and was working with AllClear ID, an identity-theft protection company. On a hunch, she asked them to look into her daughter's problem. What they discovered came as a shock: For 10 years, other people had been using Olivia's social security number.

"They took out $1.5 million in loans to buy boats and cars," Olivia says. "They had multiple credit cards out in my name, and had defaulted on several loans." In other words, even though she still didn't have her first charge card, Olivia's credit history was already in tatters.

McNamara Family.A Widespread -- and Growing -- Problem

Olivia isn't alone: According to a recent survey by AllClear, of 27,000 records, almost 11% of children have had their personal information compromised -- and the numbers are getting higher. Today, children are 35 times more likely than adults to have their identities stolen. To make matters worse, because children don't generally use their Social Security numbers, the breaches can remain hidden for years, giving identity thieves virtually endless opportunities to manipulate records.

And the problem itself is tremendously complicated. As Jamie May, AllClear's chief investigator, explains, "The tools used by scammers run the gamut, from physical break-ins to highly sophisticated viruses that scan computers for tax returns and school records." Once an identity has been taken, it can be resold dozens of times to multiple criminals. "We've seen identities for sale for as little as $40 in chat rooms," May says. "Fraudulent Social Security cards often show up in flea markets."

There are several different types of identity thieves who use the stolen information for a variety of scams. At one end of the spectrum, May notes, "some identity thieves are illegal immigrants trying to establish lives." In 2011, AllClear found 3,000 children whose records had been breached; some of those victims' Social Security numbers had been used to establish 2,353 utility service records, apply for 214 driver's licenses, and register 345 cars.

For those people simply trying to establish a life, the goal is to use the stolen information in as unobtrusive a manner as possible. But serious thieves use stolen information in elaborate moneymaking schemes. Having your identity fall into the hands of this type of scammer can be much more damaging, both economically and in terms of the difficulties they later create for the children they exploit.

"They follow the same methods we advise young adults to use when building their credit scores," May explains, noting that many identity thieves start by opening cell phone accounts. "They're a great way to establish a fraudulent -- or, for that matter, a real -- credit file. The scammers then move onto small loans, then larger loans, and so on."

In Olivia's case, her stolen identity had been used to open 42 separate accounts, including several credit cards, several car loans, and at least three mortgages. According to AllClear, almost all of the accounts are in default.

A Flaw in the System

But how can multiple scammers use the same Social Security number? The key, May explains, is that they exploit a flaw in the system: "Credit bureaus don't treat Social Security numbers as unique identifiers." In other words, when a credit agency runs a check, it generally hits three data points -- a Social Security number, a birth date, and a name. "This is why we often see the same number used by different identity thieves," May says. "When it's attached to a different name, it doesn't necessarily flag an alarm at credit bureaus or in the government."

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This is also why many parents don't find out about identity theft until it's much too late. As May points out, "The usual advice is that parents should run credit reports on their children." But when AllClear, May's company, began investigating identity theft, they found that these breaches almost never show up on traditional credit reports. However, May says, "When we changed our search to simply use social security numbers, the floodgates opened." In one case, AllClear found that a child's Social Security number was being used by six adults, all of whom had paired it with a different name and date of birth.

Making things even easier for identity thieves, young people's Social Security numbers are often left poorly protected. Schools and the organizations associated with a host of children's activities often use them as a basic form of identification. And every group that has access to a child's Social Security number offers another opportunity for a data breach. May takes a hard line: "We advise parents to treat their children's Social Security numbers as top secret, confidential information. When somebody asks you for your child's Social Security number, don't be afraid to question them."

The Cost to Victims

On the bright side, victims of identity theft aren't held responsible for the funds taken out in their name. But the price for victims still can be measured in many long hours of frustration as they work to clean up their records, and also lost opportunities. AllClear's May notes that, in some cases, identity thieves use stolen Social Security numbers when they're arrested, a process that can leave their victims with criminal records -- and unexpected costs: "Cleaning that up requires that they hire an attorney," he says.

Even identity theft victims who don't have to deal with criminal records often end up paying in other ways. As May points out, "Sometimes, a kid with a stolen identity has to wait a semester to start school, or is stuck in the foster system, or misses out on an internship. It can take months or years to fix these problems."

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Identity Thieves Are Targeting Our Kids! What Parents Must Know
By Lita Epstein, credit and debt expert, WalletPop.com

When even the announcer of the The Price Is Right is a victim of identity theft, you know the crime can happen to anyone. Rich Fields, of "Come on down" fame, reportedly had $71,000 stolen and had to freeze his accounts ' including his direct deposit of his pay -- while he tries to recover the money. At least he got wise to the problem.

One of the scariest things about identity theft is that you could be a victim and not even know it. Identity theft includes any act in which your identity is used fraudulently. I'm sure you've head of credit card fraud, where someone opens an account in your name or uses your credit card number without your permission. But other common identity theft scams include bank account fraud, phone or utilities fraud, government documents fraud and Social Security fraud.

In this feature, we list four red flags that can signal that you are a victim of identity theft.

First Up: Red Flag No. 1



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Your credit cards or other bills don't arrive when you expect them.

A thief could have changed your address with a financial institution and started using your credit card. Since the bills are no longer coming to your address, it will take longer for you to figure out the problem. Most financial institutions allow you to look at your accounts online. Do so regularly to avoid this problem. If you see charges you don't recognize, call your bank's customer service line immediately.

Next: Red Flag No. 2



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You start to receive credit cards for accounts you didn't open yourself.

A thief may have responded to a credit card offer using your name and credit history and been planning to intercept the card from your mailbox.

Don't hesitate one second. Call the financial institution that issued the card immediately and explain that the account was opened fraudulently.

Next: Red Flag No. 3



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You are denied credit even though you know you have a good credit history.

Whenever you are denied credit -- for whatever reason -- you are entitled to free copies of your credit reports from each of the three top credit reporting agencies; Equifax, Experian and TransUnion. As part of that denial, you should get a letter that tells you how to obtain those free credit reports. Take advantage of this law and review your credit report to see what the problem is. If you find fraudulent accounts on your report, follow the instructions that explain how to get them removed.

Next: Red Flag No. 4



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You get a call from a store about a purchase you know you didn't make.

If you do get this type of call, don't give out any information because the call could be a phishing attempt (that's when thieves pretend to be calling or emailing from a store or bank in hopes you will disclose personal financial information ' like your Social Security number or bank account password).

Find out as many details about the purchase as you can, as well as the caller's name and contact information. Look up a contact number yourself. Call the company after you've checked it out. Only after you know the company is legitimate should you give out any personal information. Then, call your credit card company and let them know that your card was used fraudulently.

Next: Here's What to Do If You Are a Victim



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Any time you suspect fraud you should place a fraud alert with all three credit reporting agencies. They will place a 90-day alert on your account, which can be extended. They will also send you a copy of your report to be sure there aren't other problems. These are the contact numbers to report fraud:

' Equifax - 1-800-525-6285
' Experian - 1-888-397-3742
' TransUnion - 1-800-680-7289

You can never err by being too cautious. It's better to report a possible fraud attempt and be wrong, than not to report one and allow a problem to continue to grow and fester.



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That has certainly been the case with Olivia, who is still struggling with her deeply tainted credit record. Her mother, Linda, has worked hard to resolve the issue. "I have spent many, many hours on this mess," she notes. "I sent at least three letters to each of the credit agencies and tried many times in vain to get someone on the phone to talk to me."

It has even taken a toll on Olivia's financial development. She had hoped to begin building a strong credit history while in college, but she's had to shelve that plan until her identity theft troubles are resolved. For now, she notes, "I'm still financially dependent on my parents, and I still live in the dorms, so it's not a big issue. But if it's not solved by the time I graduate and move into my own apartment, it could be a real problem."

Bruce Watson is a senior features writer for DailyFinance. You can reach him by e-mail at bruce.watson@teamaol.com, or follow him on Twitter at@bruce1971.
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