Identity thieves do not rely on just real identities to commit fraud. With ‘synthetic’ identity theft, they use only a portion of your personal data to help them create fictitious identities, but that does not necessarily lessen the negative impact on your credit. Forensic experts estimate that synthetic identity theft is actually more prevalent than so-called ‘true-name’ fraud.
How it works
Traditionally, identity theft occurs when a thief obtains someone’s personal information and uses it to assume his or her identity. With synthetic identity theft, the perpetrator typically combines real and fabricated information to produce a fictitious identity and then uses it to apply for credit. Alternatively, a perpetrator combines the real personal information of multiple identities. For example, someone could use your Social Security number (SSN) with another individual’s name and a third person’s address.
The thief’s initial credit application using the synthetic identity usually is rejected, but credit reporting agencies will generally open a new credit file for the identity. The fraudster can then try again — and stands a good chance of approval. Some card issuers offer small credit lines to applicants with little or no credit history. These ‘starter’ cards can be used to establish a credit history, paving the way to more lucrative opportunities for fraud in the future.
Why it is costly
What is at risk if your SSN is involved in one of these scams? Fragmented (or sub) files could become associated with your SSN at credit reporting agencies. Because many agencies do not cross-reference SSNs with other identifiers (such as names or addresses), victims may have fragmented files for entirely different identities linked to their main credit files.
Credit agencies can take months or even years to clean up negative data from fragmented files. In the meantime, creditors rely on false information in your credit report.
Experienced perpetrators often seek out SSNs that are not actively used. For example, a thief who incorporates a child’s SSN might not be discovered until the victim tries to apply for student loans or jobs with employers that check credit histories.
What to do
To prevent becoming victim to this type of theft, obtain free credit reports annually, and consider subscribing to identity theft protection services that provide real-time monitoring. Contact us for help reviewing credit reports for signs of synthetic fraud and working with credit agencies to correct errors.