Every year, 26,000 children age out of the foster care system, usually when they turn 18, according to the Federal Trade Commission. Many of them are on their own to take the steps needed to set up adult lives: renting apartments, getting cell phone plans and enrolling in college.
And every year, many foster kids learn for the first time that they are victims of identity theft and will be held back in establishing their independence by years of accumulated bad credit in their names.
"It's a really difficult crime to monitor," according to Nikki Junker with the Identity Theft Resource Center. "You know that they are more vulnerable simply by their information being passed around."
When a child is in foster care, his personal documents are passed between family members, caseworkers, foster homes and other providers. There is a heightened risk for loss and abuse of this sensitive information.
That's why Congress passed a law in 2011 requiring child welfare agencies to get annual credit reports for foster children starting when they're 16 and help them clear up any inaccurate information. The U.S. Department of Health and Human Services estimates there are 74,000 foster children in the U.S. age 16 and older.
Children under the age of 18 aren't even supposed to have credit reports — in most cases, they're too young to get credit cards or enter into other contracts. But all too often, the credit reports — with erroneous and fraudulent histories — are there.
"We know it's an issue nationwide," said Karen Barney with the Identity Theft Resource Center. "It totally wrecks your credit, especially when it comes to getting into college.
A 2013 report by the Annie E. Casey Foundation estimated that 5 percent of foster children aged 16 and older have some form of bad credit.
Recently, the Consumer Financial Protection Bureau published template letters that caseworkers can send to credit bureaus to report errors in foster children's credit reports.
"The Bureau is very concerned about foster care children's vulnerability to credit reporting problems that can wreak financial havoc for them," said Richard Cordray, director of the Consumer Financial Protection Bureau, in a statement. "We want to help ensure that youth leave foster care with clean credit so that they have a firm foundation for their financial future."
Bad credit can make it difficult for former foster children to rent an apartment, get student loans, get a job and buy a car, according to the Annie E. Casey report.
The new tools released by the Consumer Financial Protection Bureau include letters caseworkers can send credit agencies to notify them that a credit report wrongly exists for a minor or that there is an error in a foster child's credit report.
The Consumer Financial Protection Bureau also recommends that foster care caseworkers educate children on the importance of good credit and how to maintain it.