NEW YORK (CNNMoney.com) -- For parents who've wrecked their own credit rating, cashing in on junior's clean financial history is increasingly tempting.
Children make easy targets for identity thieves because they don't use their own credit and likely wouldn't notice any discrepancies until they reach adulthood.
And when a parent uses his or her own child, the risk of prosecution is lower because of the family ties. It's not easy to turn in mom and dad, especially if they were simply trying to provide for the family.
"The parent is saying, 'I have to keep the lights on and water running,'" said Adam Levin, co-founder of Identity Theft 911 and CEO of Credit.com. "But unfortunately, they often fall behind on payments and in the end, they've just put their child behind the 8-ball."
If parents have a child's social security number, they can do almost anything -- no matter how young the child is -- because a credit check does not verify a person's age, said Robert Siciliano, CEO of IDTheftSecurity.com.
Here are several ways parents can damage their children's financial reputation before they even finish school:
Taking out loans: With access to every piece of their child's financial identity, it's easy for parents to take out a loan in their son's or daughter's names.
One college senior from the D.C. metro area, who spoke to CNNMoney.com on the condition of anonymity, didn't find out that her father had taken out education loans in her name until she went to open her first credit card and was denied.
"I never thought he would ever do something like this to me," she said. "It's really manipulative to do that to your kids because you know you have that power over them."
Not only is she now stuck paying back the loans -- plus interest -- but her credit is shot.
"My credit is really bad now," she said. "I've had to have a co-signer for every apartment I've ever had, I can't get a credit card and getting any other loans or even a car is going to be very hard."
But she said she would rather put up with the financial pain than turn her father in to the authorities.
"It's just not worth the emotional turmoil," she said. "But every once in a while I do get so frustrated that I almost go ahead and do it."
Opening credit cards: When their own cards are maxed out, parents can easily apply for new cards in a child's name.
"Some parents will do this because they still want to buy the things they can't afford," said Linda Foley, founder of the Identity Theft Resource Center. "And the easiest opportunity to do this for someone who is really desperate is to use their own family members."
Alex, a 28 year old from Ann Arbor, Mich., said his father opened three credit cards in his name while he was in college. After Alex received packages containing items that his father had ordered online, his dad admitted to activating a credit card in Alex's name because he desperately needed the money.
"He said a card had come in the mail so he activated it, that it wasn't a big deal and he would pay it off, and I had no reason not to trust him." said Alex. "But once I got a credit report and found out there were a bunch of them and they hadn't been paid off, that's when I got angry."
Two of the credit cards Alex's dad opened had been maxed out and all three were past due on payments. As a result, Alex's credit score dropped by about 150 to 200 points.
Creating new accounts: Opening a utility or phone account in a child's name is another common offense, said Siciliano of IDTheftSecurity.com.
Because of the availability of personal information to close family members, more than half of identity theft cases are typically committed by parents, he said.
"Parents who are compromising their child's identity are generally doing it because of a need, like a single mom whose electric bill is too high and the lights get turned off, so the path of least resistance is putting it under the baby's name," said Siciliano.
"But then a light bulb goes off in her head and she opens a mobile phone account, and the next thing you know she has a credit card under her kid's name or gets a car loan," he said.
Co-signing a lease: It's not just underage children who are being targeted.
More parents with subpar credit are turning to their adult kids for help. The number of children between 21 to 28 years old agreeing to become co-signers of a parent's auto lease has jumped nearly 30% over the last two years at LeaseTrader.com, an auto lease transfer marketplace.
"You used to rely on your parents to help you out or co-sign something," said John Sternal, vice president of marketing and communications at LeaseTrader.com. "Today it's a little bit of the opposite, since kids often have credit situations that haven't been tarnished as much as their parents'."
If payments are made, co-signing a lease for a parent can actually benefit a child by helping him or her to establish credit. But many young adults don't realize the responsibility they are taking on and how important their credit is, said Sternal.
"Credit is the life-blood for everything today, so you want to do everything you can to protect your credit going forward," said Sternal.
Credit card horror stories: Did your card issuer double your interest rate, shut down your credit line or tack on exorbitant fees? Tell us about it and you could be included in an upcoming story on CNNMoney.com. For the CNNMoney.com Comment Policy, click here.
|Overnight Avg Rate||Latest||Change||Last Week|
|30 yr fixed||3.86%||3.77%|
|15 yr fixed||3.09%||3.01%|
|30 yr refi||3.84%||3.78%|
|15 yr refi||3.10%||3.01%|
Today's featured rates:
More than 5% of DACA recipients have started their own businesses since enrolling the program, according to a recent survey. More
Tax revenue and spending both rose in fiscal year 2017, which ended last month. But spending growth outpaced revenue growth, according new numbers from the federal government. More
This may go down as the year the world officially recognized Jeff Bezos's Midas touch. More
In 1998, Ntsiki Biyela won a scholarship to study wine making. Now she's about to launch her own brand. More
More companies are offering student loan repayment help to their employees. More