A special type of ID theft exists called “Synthetic ID Theft” that takes advantage of the bureau’s matching system that is used to associate data with the individual consumer.
With synthetic ID theft a thief mixes fake information with real or partially real information from an unsuspecting victim. This often results in a new credit file being created for the fraudster, and the subsequent negative information eventually being merged into the consumer’s file, which of course harms their credit.
As time goes on, the flawed system enables credit reports to accumulate additional and erroneous personal identifying information. This would include incorrect names, addresses, employers, and Social Security numbers.
When one Social Security number is associated with more than one name, a credit sub-file is created. When a woman gets married and changes her name, a sub-file is created. While this example may be reasonable, consider the next one.
When John Smith, Jr. fills out a credit application and forgets to put the Jr. at the end of his name, this name variation will also create a credit sub-file as well. Clearly, not so reasonable. These sub-files exist because the credit reporting agencies verification algorithms allow for partial matching of personal information.
This combined with the inability to distinguish between fraudulent and normal variations and consumers’ lack of expertise to identify and eliminate these variations laid the groundwork for loopholes that perpetuate a clear path for an identity theft.
With Synthetic ID Theft, an identity thief creates a new identity by combining real and fabricated personal information. The sub-file that is created is not an issue as it is not associated with the consumer’s main file.
The consumer does not detect the variation, even if the credit report is reviewed. The only way there is an association of the A file with the sub-file is if a potential creditor requests a report that shows every file associated with the Social Security number.
Even then, the synthetic identity may not be detected if the information if there is not negative information in that sub-file. In this instance, the sub-file has no bearing on the credit score of the consumer, and is thus a non-issue.
Usually, the only time a consumer is aware of the sub-files that are used to perpetuate synthetic identity theft is when they are denied credit because the identity has maxed out a line of credit and entered into default.
Make sure you educate your clients about Synthetic ID theft as this is becoming an ever growing problem more and more consumers face each year.