Guest posted by: Linda Criddle, president of Safe Internet Alliance

Stealing children's social security numbers (SSNs) to use or sell is not new, but it is becoming more widespread. The problem is expected to get worse before it gets better, according to the Associated Press.

Financial identity theft has grown into a multibillion-dollar problem, and at least 7% of the cases that are reported target children's identities. The actual number of child victims may actually be much higher, as the theft of a child's financial identity is often not discovered until the child applies for credit.

It is precisely because kids aren't seeking credit that theft of their Social Security numbers is so lucrative. The allure of an untainted SSNs (one with no credit problems) is in the opportunity it represents for creating fake lines of credit and charge up high debts.

How financial ID theft from kids happens

There are two primary threats to kids’ financial identities. The first comes from family members looking for a new line of credit. They steal their children's, nieces’ or nephews’, even younger siblings’ identities, primarily to use themselves to create new lines of credit.

The second threat comes from criminal businesses that use computers and publicly available information to find Social Security numbers for which no line of credit has been established. You may wonder how criminals steal numbers that aren't in any system, but that's the beauty of it. They don't have to know whose SSN they're stealing, they just have to find SSN's that are legitimate and have no credit history.

The way these criminals collect the SSN's is tied to the antiquated method by which SSN's are generated.
 
SSN's have three sections; the first three numbers represent the state in which the SSN was issued (after 1972 they represent the zip code). Anything between 001-003 and before 1972 for example, is issued in New Hampshire.

The second set of numbers in the social security string represents a specific window of time during which the number was generated, quickly identifying the age of the legitimate SSN recipient.

The last four digits are the only random numbers - and ironically those are the ones you're asked to provide most frequently.  Knowing how SSN's are created, criminals can use a computer program anticipate the next set of numbers to be generated, then they can test these to find which are legitimate.

Criminals then take these SSN's and sell them to people who want credit they can use to accumulate huge debts they won't have to repay. These numbers sell for anywhere between a few hundred to several thousand dollars apiece.

“When a creditor gets a request in with a valid SSN, one that they can confirm has been issued, they don’t get information telling them to whom the number was issued," says Linda Foley, of the Identity Theft Resource Center (ITRC), an organization that offers counseling and resources to identity theft victims.

"That’s not information Social Security gives out.  Nor is it information that the three credit reporting agencies have access to."

From that point, it is easy for the thief to put down his name, a date of birth, and a reasonable excuse for why he his Social Security number had been issued recently.

Once the purchaser of the stolen SSN defaults on their loans, the credit line is shut down and that SSN is no longer of use - but serial SSN thieves simply buy a new SSN and continue running up debt. Assistant US Attorney Linda Marshall from Kansas City states, “If people are obtaining enough credit by fraud, we’re back to another financial collapse. We tend to talk about it [identity theft fraud] as the next wave.”

Because SSN's with no credit line often come from young children who have no money of their own, these numbers are ideal candidates for opening a new, unblemished line of credit. Add to that the low likelihood that anyone is monitoring that child's financial identity, and crooks have a winning combination.

Julia Jensen, an FBI agent in Kansas City, recently discovered a ring of criminals using public searches to identify SSN's without credit lines while investigating a mortgage-fraud case. "The back door is wide open," she said, comparing the businesses that sell the numbers to drug dealers.

"There's good stuff and bad stuff," she said, referring to the value of a stolen SS number. "Bad stuff is a dead person's Social Security number. High-quality is buying a number the service has checked to make sure no one else is using it."

Unfortunately, experts say, it's nearly impossible to prevent the fraud because it's so easily concealed and targets such vulnerable people.  “There’s no way to protect your child completely,” says Foley.

The difficulty in protecting children's SSN's and financial identity is multifaceted:

1. Financial ID thieves are using sophisticated programs to search for dormant SSN's through databases kept by schools, doctors, and insurance companies, which typically require children’s Social Security numbers be provided.  Rapidly evolving methods used for selling the numbers make tracking this kind of theft particularly difficult. 

2. Credit issuers typically do not keep track of the age of Social Security number holders, so they cannot alert families when a child's number is being used - something Foley's organization has been trying to change since 2005, and a protection she considers vital for preventing child identity theft on a large scale.

3. Even parents who routinely check their own credit information rarely think to check reports for their children, particularly if the children have not yet begun to work. But if a SSN is compromised, criminals can run up tremendous charges in a child’s name.

4. The methods and locations used to sell SSN's change frequently, and may be camouflaged under legal transactions. Some of these sketchy companies have impressive, high-tech websites. Others advertise on sites like Craigslist.

The impact of financial ID theft on a child

It takes time and a lot of work to restore a financial reputation, and the repercussions of a damaged credit score can impact a child for life. As they seek loans for college, cars, and homes, they may struggle to qualify and be permanently subject to  higher interest and mortgage rates.

Someone has to pay the debts accrued against that SSN. Sometimes it's the victim or the victim's family that pays. More often it's the businesses that sold whatever goods were purchased that get stuck with the costs, which of course get passed on in the form of higher prices for all their customers. 

Reduce your child's risk of financial ID theft

• Keep Social Security cards locked up. These don't belong in wallets or loose in your home where others may come across them.

• Tightly restrict sharing your child's social security number. You may be asked to provide your child's SSN in many circumstances, such as  to enroll them for a sports team, or at your doctor's office.  However, you do not need to give their SSN -- you can show other evidence of age or information that your health care provider needs for billing.

• Teach your children not to share their SSN’s. When they applying for jobs -- at which point they finally do have to share the number -- make sure the employer and company are legitimate so the risk of resale is low.

• When creating a bank account for your child, set up only a savings account and make sure there is no overdraft protection included. 

• Monitor your child's credit as you do your own. If you wait until you see a red flag, a lot of damage may have occurred, and often you'll see no red flag at all until your child seeks credit. Running a credit report does introduce some risk, but you can mitigate this by freezing their credit. This way, if the very act of checking your child's credit history generated a credit file you have squashed the chances for abuse. Unfreeze their credit when they do seek out a loan.

Red flags indicating that your child's financial ID has been stolen

There is no silver bullet to protect your child from ID theft, but there are some red flags. Be suspicious if:

• your child receives any unsolicited credit offers in your child's name, or notices from debt collectors.

• Someone who has access to the child’s SSN shows sudden evidence of prosperity

• You get a  notice from the IRS saying the SSN number you used on your tax return (or on their tax return) is a duplicate number.

• Your insurance company denies a claim for your child because they have already covered the procedure.

• The bank notifies you when you go to establish a savings account for your child, that an account using that SSN already exists.

• You receive a warrant for a traffic violation for a child without a drivers license.

• Your child is denied government assistance because records show they are already receiving benefits

• You get a request for a job verification when your child has never had a job

If your child's credit has been compromised, take immediate action

Report any suspected theft of your child's financial identity. Use the Federal Trade Commission's Web site to find and follow the steps needed to report fraud. Or call their toll-free identity theft hotline at 1-877-ID-THEFT (438-4338). THEN call Social Security. You may also want to visit the ITRC’s website for facts and information, or call its hotline at (888) 400-5530.

What's happening to reduce the risks

The non-profit Identity Theft Resource Center has proposed a solution to the growing problem of illegal use of children’s SSNs: the creation of a Minors 17-10 Database, which would include not only the Social Security numbers, but also first and last names and birth month and year to credit organizations, departments of motor vehicles, and other institutions that require a Social Security number for background checks. The information would be kept on until the child is 17 years, 10 months old. This age was chosen, Foley said, because this is the time when teenagers are putting in paperwork for student loans and other credit forms.