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Updated on Wednesday, September 14, 2016
Imagine you’re 20 years old and you’re ready to open your first credit card. You fill out application after application, but you’re constantly rejected. Looking for a reason, you pull your credit report and find that your credit has already been established — and wrecked — by none other than your parents.
This scenario isn’t all that uncommon. It’s a case of so-called “familiar fraud,” which occurs when the victim knows or is related to the person who steals their identity. Children are an especially easy target for family members, because they are much less likely to be vigilant about their credit history and their personal information is often easily accessible.
In fact, familiar fraud is five times more likely to happen to teenagers, according to a 2015 study by Javelin Strategy & Research. Child identity theft by a relative can be a touchy issue for obvious reasons. In many cases, the parent may have good intentions and may not even think what they have done is wrong.
“[Parents] don’t really necessarily see it as a crime or see it as harmful until later,” says Eva Velasquez, CEO of the Identity Theft Resource Center, a consumer protection group. “[They say] ‘My credit is ruined and I have to keep lights in the house so I’m going to use my kid’s [information]. They are benefiting from it and they’re my kid anyway.’” If the parent isn’t able to pay their debts off, they can wind up doing more harm than good.
And when children find out that their credit has been ruined, it’s not an easy matter to rectify. More than one-third of young people who fall victim to familiar fraud only find out when debt collectors start calling, and another 7% find out when they are rejected for new credit.
Victims of familiar fraud could report the crime to relieve themselves of the debt. Victims of identity theft probably wouldn’t hesitate to file a police report about an anonymous hacker. The story changes when the hacker is their parent or a sibling.
So what do you do if you realize that a family member has used your personal information to open financial accounts in your name?
Here are some steps to follow:
Create a paper trail.
The key to getting fraudulent accounts removed from your credit history is to create a paper trail showing you were the victim of identity theft. Start your paper trail by filing a report with the police and filing a report online or by phone with the Federal Trade Commission. Make copies of all of your reports, Velasquez recommends.
If you know a family member or friend stole your identity and you’re nervous about the idea of going to the police, consider this: Filing a police report doesn’t necessarily mean you’re pressing criminal charges against your family member.
“Creating a report is creating a record of the theft so that the victim can prove the debt is not theirs,” says Adam G. Singer, a consumer attorney located in New York City. “That is a matter of civil law. If a person were to press charges, it would then become a matter of criminal law.”
Contact each lender individually.
Make a list of all the fraudulent accounts that have been opened under your name and contact each lender or debt collections firm individually. Explain that the charges were fraudulent and that you would like to dispute them.
Even if you have a copy of your police report and an FTC complaint handy, the lenders may ask you to provide further proof that the accounts weren’t opened by you.
This could mean bringing a birth certificate that proves you were a minor when the fake account was created or documentation that shows you weren’t living at the address or in the area where the account was created. Make sure to take notes on all of the conversations that you have with any institutions along the way.
Add a fraud alert to your credit report.
Protect yourself from future fraud by adding a fraud alert to your credit reports. Contact one of the three credit reporting agencies — Experian, TransUnion, or Equifax — to place a 90-day fraud alert on your credit report. When you have an alert on your report, a business has to verify your identity before it issues credit. This makes it more difficult for someone else to open more accounts in your name.
When you contact one credit bureau and request a fraud alert, the alert will also be applied to your files at the other two bureaus as well. You can extend the alert to stay in effect for up to seven years after filing a police report or filling out a complaint form on the Federal Trade Commission’s website.
Alternatively, you could consider a credit freeze.
When your credit is frozen, no one can open a new line of credit under your name unless you agree to thaw your account. Fees depend on the state, but victims of identity theft can usually ask to have those fees waived.
Make credit checks a monthly ritual.
Many young people don’t realize their identity was stolen to open financial accounts until debt collectors begin calling. It’s important to start tracking your credit history early, says Karen C. Altfest, a financial adviser with Altfest Personal Wealth Management.
“You have to know what’s in your accounts and you have to know what’s going on,” she says.
There are some identity theft protection services that charge monthly fees to monitor your credit year-round. But you can also use free services like Credit Karma and Credit Sesame to check your credit report for free and without penalties to your score.
At the very least, comb through your monthly financial statements and make sure nothing looks out of the ordinary. Another easy tip is to ask your bank to alert you anytime charges over a certain dollar amount are made on your account.