Identity theft is an invasive crime that impacts millions of Americans each year. As criminals come up with more advanced methods to steal personal information, synthetic identity theft has become one of the most insidious and difficult to detect forms of fraud out there.
In this comprehensive guide, you’ll learn what exactly synthetic identity theft entails, how criminals commit this type of fraud, warning signs to watch for, and most importantly, what steps to take to minimize your risk.
What is Synthetic Identity Theft and Why is it on the Rise?
Synthetic identity theft is a sophisticated type of identity crime where thieves combine real and fabricated information to create new identities which they then use to open fraudulent accounts.
Unlike traditional identity theft where criminals steal the identity of a single existing person, synthetic ID theft generates completely new identities that only exist on paper. According to experts at the Identity Theft Resource Center, it accounts for over 80% of all identity fraud today.
How Criminals Manufacture Synthetic Identities
Fraudsters manufacture synthetic identities by piecing together various elements of legitimate personal data from multiple sources, such as:
- Social Security numbers
- Phone numbers
They then combine this real data with falsified information to create a new fake identity. These fabricated identities can be used to open credit cards, take out loans, register phone lines, enroll in government benefits, and countless other activities that require verifying your identity.
The more complete the synthetic identity, the easier it is for criminals to successfully use it to commit fraud without detection.
There are two primary methods fraudsters use to create synthetic identities:
Manipulated Synthetic Identities
With this approach, criminals take a person’s actual identity information such as their SSN, name, or date of birth, then modify certain elements of it, like changing the street address by one digit.
By slightly altering a few details of the real identity, it becomes a new identity on paper that thieves can use to open fraudulent accounts. This technique also avoids banks flagging applications as suspicious if all the data perfectly matches previous applications already on file for that SSN or name.
Manufactured Synthetic Identities
More sophisticated synthetic identity fraud involves manufacturing a completely fictitious identity from scratch using 100% legitimate personal data sourced from multiple unsuspecting victims.
Imagine a criminal collects your SSN, someone else’s name and address, a third person’s phone number and date of birth, then combines it with a fake email to create a brand new synthetic identity profile.
The fraudster can then successfully open accounts using this manufactured persona because all the components come from real people and can pass identity verification checks. This makes it exponentially harder for banks and law enforcement to detect.
Synthetic Identity Theft Statistics: By The Numbers
- As many as 1 in 20 Americans have some form of false information connected to their identity profiles as a result of synthetic identity fraud, per the Federal Reserve.
- Synthetic identity theft losses reached nearly $6 billion in 2016, according to Federal Reserve estimates. That‘s up from just $1 billion 10 years prior in 2006.
- By 2023, synthetic ID fraud is projected to cost lenders $10 billion annually, says TransUnion.
- It takes victims an average of 7 months to discover they are a victim of synthetic identity theft, according to a Carnegie Mellon study.
- Victims lose approximately $15,000 on average due to synthetic ID fraud, resulting in severe financial and credit devastation that can take years to recover from.
4 Sneaky Signs You May Be a Victim
The insidious nature of synthetic ID theft makes it incredibly challenging to detect, sometimes going undiscovered for years. But there are a few subtle signs that could indicate you’ve been targeted:
1. You Notice Unfamiliar Accounts on Your Credit Report
If you check your credit report and find accounts or addresses you don‘t recognize, it may be a sign someone used your identity information to open new fraudulent accounts.
2. Debt Collectors Reach Out About Debts You Never Owed
If a debt collector contacts you seeking payment for a loan or debt you know nothing about, there‘s a high probability it was taken out fraudulently in your name via synthetic identity theft.
3. You Receive Credit Card Offers for a Child
Seeing pre-approved credit card offers directed at a child who shouldn‘t have a credit profile may mean a synthetic identity was generated in their name using their Social Security number paired with a different name and birthdate.
4. Previously Inactive Accounts Show New Activity
If a dormant credit card or old bank account you haven‘t used in years suddenly shows new transactions or charges, it could point to synthetic identity fraud. Fraudsters commonly make small test charges first to see if the account is still open.
How Can You Protect Yourself from Synthetic Identity Theft?
While synthetic identity theft is on the rise, there are preventative measures you can take to reduce your risk and catch any suspicious activity early:
Monitor Your Credit Reports Frequently
Keep close tabs on your credit reports from Equifax, Experian and TransUnion to inspect for any unknown accounts or inaccuracies that shouldn‘t be there. Annualcreditreport.com offers free credit reports from each bureau once per year. Monitoring your credit is your best line of defense.
“Consumers have a right to check their credit reports from all three credit reporting agencies for free once a year. I recommend taking advantage of this to closely monitor your file for any anomalies that could indicate fraud,” urges identity theft expert Eva Velasquez from the Identity Theft Resource Center.
Freeze Your Credit
Placing a credit freeze restricts access to your credit report, preventing criminals from opening any new accounts in your name. If you suspect synthetic identity theft, experts recommend freezing your credit with all three bureaus immediately.
“Freezing your credit files can block identity thieves from fraudulently opening accounts using your information. It‘s the single most effective way to stop additional fraud in your name,” says Neal O’Farrell, Executive Director of The Identity Theft Council.
Opt Out of Pre-Approved Credit Offers
Pre-approved credit card offers you receive in the mail pose risk. Identity thieves could fill them out with your name and different account details to open fraudulent accounts. Opting out at OptOutPrescreen.com prevents these unsolicited offers.
Shred Financial Documents
Properly shredding any papers or documents containing sensitive information cuts off one avenue identity thieves have of collecting your data. Never toss bank statements, credit card bills, or other docs with personally identifiable details in the trash without shredding them first.
Beware Phishing Scams
Use caution with emails or phone calls asking you to verify personal information like your SSN or bank account numbers. Often these phishing scams are fraudsters trying to steal your data to create synthetic identities. Legitimate banks will never call or email asking for full account info.
Use Caution on Social Media
Avoid oversharing personal data like full birthdates, addresses, alma maters, or mother‘s maiden names on social media sites where fraudsters can access it. The more identity details criminals can gather from public sources, the easier it is for them to create synthetic IDs.
Monitor Your Child’s Credit
Check to see if your minor child has a credit report, as that could indicate thieves used their SSN to manufacture a synthetic identity. Parents can freeze their child’s credit to prevent this type of fraud.
Conclusion: Don‘t Become A Victim
As criminals come up with more sophisticated ways to exploit consumers’ personal information through methods like synthetic identity theft, we all must take proactive steps to protect ourselves. Safeguard your sensitive data, diligently monitor your credit reports, and act quickly if you suspect any fraudulent activity.
While synthetic identity theft can have devastating financial consequences, being aware of the risks, warning signs, and prevention best practices makes it much harder for fraudsters to successfully target you as a victim. With vigilance, these artificial identities can be stopped before they cause damage.