Synthetic identity theft is the most common type of identity crime in existence. In fact, synthetic identity frauds and thefts make up for as much as 85% of all identity crime cases.
As such, you should want to stay informed on how fraudsters approach synthetic identity crimes. This involves knowing the difference ways an identity thief could get your information and defraud you, as well as what you can do if you become a victim.
Let’s cover all that …
What is Synthetic Identity Theft?
Synthetic identity theft is a type of identity crime that involves falsifying part or all of the person’s information. The details could come from 100% real people, where minor adjustments are made to details like the person’s mailing address or place of work. Meanwhile, the identity could also fabricate off of the Social Security Number of a child or of someone that’s deceased.
Regardless of who gets victimized, the criminal often takes the same approach.
How a Fraudster Pulls of a Synthetic Identity Crime
This breaks down into four main steps.
1) Finding an identity to use
The fraudster must find an identity to create or steal. This involves discovering somewhat authentic information on someone’s identity. This can be of someone living or dead; Social Security Numbers date back well over 100 years.
Children make for great targets. Identity thieves are able to pull off synthetic identity fraud easily because of the lack of credit report. If there is no open file for the child, all it takes is a single credit inquiry to trigger one to open with partially fabricated information. Now, your 2-year old toddler is suddenly a 30-year old businessman about to drain all his credit cards.
It all comes down to the Social Security Number. Over 15-million numbers have already been used for criminal reasons. It’s a faulted system and one that cannot be avoided, which is why so many are exposed to identity theft risks. If you are a parent, it’s your responsibility to keep your child’s number safe and the card secure. You are the only one that can prevent an identity thief from targeting them, until they become old enough to protect themselves.
2) Creating the credit report
In most cases, a synthetic identity crime begins with a victim who does not have an active credit report. This is because the thief just has to apply with your Social Security Number to trigger the credit bureaus to create one. If the application gets made with a fraudulent mailing address, all of a sudden the fraud gets pulled off with ease.
The credit application can happen one of two ways and it all comes down to whether the fraudster is using a ‘front company’ to pull off the scam. This would be a company that’s in on the scheme, and willing to extend credit to the fictitious character.
The business’s insurance will cover the loss, creating a 100% gain. If no company exists, the thief will just start with low-limit cards and build the identity’s credit over months or years before cashing out.
The real issue comes down to how the credit report bureaus work. They create a credit report for all new borrowers, and all it takes is a credit application to cause a file to open. This is why everyone should have some type of credit activity on the go. That way, you can request your free credit report and make sure no one abuses your identity. To monitor as close as possible, you can request a free report from each of the three bureaus on a four month interval.
3) Building the credit rating
If no front company exists, the fraudster might choose to build up credit before cashing out the identity. This can be done by establishing multiple credit accounts and paying them off on time for a while. Even with a front company, building up credit is a common approach as it maximizes the thief’s gains.
This is where many thieves think they can fly under the radar. Yet, it just takes one sign that you have been targeted and you could foil all the fraudster’s plans. This is why many try to pull off the scheme in as little as a few months.
Still, having a company involved in the scheme can do wonders for the total amount that the thief manages to defraud. These companies report to the bureaus and are able to suggest that the person is an excellent borrower at high amounts, which makes it easy to get high-limit cards from other (real) companies.
Regardless of the duration of the crime, you are only held responsible if you do not report the crime after it’s discovered. If you were unaware, you will not be liable for any financial losses faced as a result of the criminal’s synthetic identity fraud.
4) Cashing out the identity
This can be done by a number of ways, but the most common technique involves buying popular electronics and selling them on a local classifieds website. The fraudster could even set up a fraudulent eBay account to sell the stolen goods of a previous theft, and then later use the eBay account to scam a bunch of customers. Most identity thieves will pass on the cashing out part to others for a slice of the pie; some find ways to cash the credit cards online instead.
If you receive a statement with any fraudulent transactions, make sure to report it right away.
Worried about becoming financially liable?
IdentityTheft.gov states the following victim liabilities when the funds are stolen from a debit card:
- Maximum of $50 if reported within two business days of discovery.
- Maximum of $500 if reported after two business days, but before 60 calendar days, or,
- Unlimited if reported after 60 calendar days.
For credit cards, the recent change in federal laws makes it so that no cardholder will be held liable for more than $50 of the losses. Of course, the appropriate documentation must get presented to the card company. This means you need to report the identity theft and get all your paperwork in order.
What Are the Signs of Synthetic Identity Theft?
Identity thieves are intelligent.
Most of the time, they make sure not to leave a trail.
The identity fraud gets pulled off before the victim notices it happened. Yet, sometimes there are little hints that can get caught; if you notice any of this, make sure to contact Equifax, Experian or TransUnion right away.
Here are some signs that you have become a victim of identity theft:
- You receive mail about an account you never opened.
- Collections agency calls you or sends a letter about an unknown debt.
- Small, unauthorized transaction shows on your credit card statement.
- Recurring mail does not show up or arrives inexplicably late, or,
- Your Social Security Statement contains errors.
The problem with detecting synthetic identity theft is that most cases involve highly-fabricated profiles. These are identities that are not real at all, or that do not have any real credit activity. As such, it takes most victims a while to find out that they have been targeted. In fact, the victim usually does not get to see any signs for themselves unless they get rejected for a credit card or loan.
What Can an Identity Theft Victim Do?
If you believe you a victim of identity theft, you should take the following steps to resolve the issue.
- Inform each of the credit report bureaus
You need to notify the credit bureaus right away. Give Equifax, Experian, and TransUnion a call and explain what happened. From there, a 90-day fraud alert (read: What is a Fraud Alert?) will get posted on your account. This will extend to a 7-year alert once you supply evidence that you were victimized by an identity thief.
You can save a lot of hassle by requesting one of the bureaus to notify the other two. It is typical of them to do so, but making a formal request will take away all your worries.
- Place a report with the Federal Trade Commission (FTC)
You are required to report your identity theft situation to the FTC. This involves documenting every piece of evidence you have on the crime. You can report an identity theft online, but make sure to print your FTC Identity Theft Affidavit when done. If not, and you leave the webpage, you will no longer have access to the affidavit.
- File a report at your local police station
You must now go into your local police station and file a formal identity theft report. Make sure you do this after reporting to the FTC, because you are supposed to include the affidavit in your report. At the same time, you must present proof of address and identity.
It’s also recommended that you print off and present the FTC’s memo for law enforcement. This will ensure the report gets filed in the right manner, as the memo explains how authorities should address the matter.
- Keep track of your credit report
Once you get victimized, it’s important to take the time and keep track of your credit report. Your information is in the hands of a criminal who used it for bad. It’s easy for that person to abuse your information once again.
You can reduce your vulnerability by requesting a new number from the Social Security Administration. That way, the identity thief will be missing the one key piece to your identity.
The new number does tie back to the old one, but the identity theft note will be there. When doing this, make sure to get a letter from the Administration that states the old number will no longer be used. The connection between the two numbers will only hold relevance to the Internal Revenue Service and the Social Security Admission.
How Can You Prevent Synthetic Identity Theft?
In order to prevent synthetic identity theft, you must stop someone from being able to fabricate a credit report with your information. The most important part is making sure that you have an active credit file, which contains accurate information about you. As this is not always an option, you must take a few more steps to stay safe.
First, you should keep track of your Social Security Number. This is the single most viable piece of information about you. If an identity thief has it, it’s just a matter of time before you get victimized. You can use the my Social Security account feature at the Social Security Administration website to monitor your Social Security Number.
Second, you should consider identity theft protection services. While these protection plans run anywhere from $10 to $30 per month, they are well worth it. You will have protection from almost all angles, as well as coverage if you do become a victim. The best part about paying for identity theft protection is that the identity monitoring platform will pick up on an identity fraud instance right when it happens.
Third, you should really try to limit what goes through your mailbox. Identity thieves love to steal mail right from your front door; it’s the easiest way for them to get personal details about you. The FTC’s ‘Prescreen Credit and Insurance Offers’ page gives instructions on how to request that you get removed from the pre-approved offer mailing list authorized by the FTC. This includes details on how to opt out for either five years or forever.
Further, you might want to educate yourself more on how to stay safe from identity theft in general. Elite Personal Finance’s 100 Best Ways to Prevent Identity Theft is a great read and gives insight on how all types of people can stay safe.
“Knowing is half the battle” is certainly true when it comes to protecting yourself from identity theft; take the time to learn not only how to prevent identity theft, but also how to identify it.
Protect Your Identity with Fraud Alerts
It’s when you let your guard down that fraudsters take the chance to attack; if you want to ensure your safety, place continuous 90-day fraud alerts on your credit file. By having these fraud alerts on your credit report, lenders will be more inclined to contact you before authorizing credit changes.
While creditors are not legally required to contact you, the alert on your file will concern most creditors enough to trigger a call. This is especially true when dealing with a new account that was opened in your name.
You can request a fraud alert from Equifax that lasts for 90 days; the alert will get passed along to the other credit report bureaus. There is a small fee for setting up the alert, but you are allowed to set up a new one when it expires. The only downfall is that the renewal is not automatic, so an attack could theoretically take place in the grace period.
Synthetic Identity Theft is a Never-Ending Risk
All humans, especially Americans, are at risk of becoming identity theft victims. The reward outweighs the risk for a lot of criminals. It’s expected that things stay this way until the government makes serious changes to identity security. While a lot of focus is put on credit card security, it’s also important to consider Social Security Number security vulnerabilities.
You cannot make nation-wide changes. All you can do is make an effort to prevent identity thieves from making you a victim. There are no guarantees that you will be successful, but the more you try the better off your identity will be. Just be prepared to handle any situation that comes up; for all you know, your details will get stolen from a Target-like data breach.
Synthetic identity theft is a real threat, but do not let it intimidate you!