Foster youth have shared experiences of identity theft, highlighting the challenges they face as they transition to independent living. One individual recounted discovering an unpaid utility account in his name when attempting to set up services for his first apartment.
Credit reports significantly influence the financial journey of almost every American. This is particularly crucial for young individuals in foster care or those aging out at 18, underscoring the importance of verifying the existence of credit reports in their names and addressing any inaccuracies.
Given their often transient living situations and the widespread sharing of their personal information across various adults and agency databases, youth in foster care are exceptionally vulnerable to identity theft.
In response, we’ve engaged with child welfare agencies, youth groups, and partners in the community and financial sectors dedicated to guiding foster youth towards making prudent financial decisions as they leave care. Many foster youth have emphasized the crucial support role of child welfare caseworkers, who often stand in for the guidance typically provided by a parent. Without such support, young people may learn financial lessons through hard experiences.
Recommended Actions: Child welfare caseworkers and their agencies can adopt several measures to ensure foster youth begin their adult lives on a strong financial footing.
Initiate Credit Report Checks Before Age 18: The Child and Family Services Improvement and Innovation Act mandates the review of foster youths’ credit reports at 16 and annually thereafter until they exit the system. Addressing inaccuracies early—particularly before turning 18—can simplify the correction process, as the individual’s birthdate may help refute incorrect information. Delays can complicate the resolution of such issues, potentially affecting the youth’s ability to achieve independence.
Dispute Credit Report Errors: Actively dispute inaccuracies on behalf of minors before they reach 18 and for those 18 or older for errors that occurred pre-18th birthday. For youth who stay in foster care until 21, dispute any inaccuracies that arise after turning 18. For detailed guidance on disputing credit report errors, Ask CFPB provides valuable resources.
Impart Financial Literacy and Credit Management Skills: Ensuring foster youth exit the system with a clean credit slate is critical. Equally vital is educating them on safeguarding their financial future and making informed decisions that align with their goals. This education should include annual credit report reviews and the process for disputing inaccuracies.
By implementing these steps, child welfare caseworkers can significantly impact the financial health and independence of youth transitioning from foster care.
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