Home > News > It’s Alive! Criminals Are Creating New Identities From Bits & Pieces of Yours

Comments 0 Comments

Digital criminals inventing and exploiting identities out of thin air, rather than impersonating real consumers, are a fast-growing menace, according to a new report from fraud-fighting firm ID Analytics.

This relatively new form of identity fraud, called synthetic identity fraud, involves criminals using random Social Security numbers, mismatched names and birthdays, and other personal characteristics that they slowly nurture into full-blown identities that can be used to obtain credit cards, cellphones and more.

Fraud rates for this kind of crime are up more than 100% since 2010, ID Analytics says in its white paper, “The Long Con: Analysis of Synthetic Identities.”

The firm found that fully 2% of the applications for credit cards and cellphone accounts used invented identities.

While consumers don’t end up with impersonators from this crime, they certainly can suffer from collateral damage. A criminal picking a random Social Security number might unintentionally victimize the number’s rightful user, for example.

“The truth is it’s just not that hard to create synthetic identities,” said Dr. Stephen Coggeshall, chief analytics and science officer at ID Analytics. “Synthetic identity fraud is a significant and growing problem as fraudsters continue to find new ways to commit crimes despite technological advances.”

Synthetic fraud is tricky to discover because there often is no victim to cry foul. When a criminal uses a stolen credit card to make a fraudulent purchase, the cardholder is often the first to know, and to report the crime. That line of defense is non-existence in synthetic fraud.

Making matters worse: Rules that changed the way new Social Security numbers are issued have made life easier for these criminals. Until 2011, SSNs were issued using a distinct (and predictable) pattern, and the Social Security administration would publish blocks of numbers that had been issued, making validity checks easy. Now the numbers are generated randomly, making verification distinctly more difficult.

“Before 2011 we could look at an SSN we’d never seen before and we could tell immediately if it was valid, if it had really been issued,” Coggeshall said. “The change in the way numbers are issued plugged some holes but opened up others.”

In a dramatic example of the places synthetic fraud is wreaking havoc, ID Analytics said it worked with an unnamed state tax agency recently and found that over the span of three years, roughly 1.4% of the tax return population appeared to be synthetic. These synthetic identities were used to obtain tax refunds totaling $20 million.

Synthetic identities can be created for a number of reasons, and not always to commit fraud. Undocumented workers often use them in order to qualify for employment and open bank accounts, fully intending to pay their bills. Other invent IDs to escape a bad credit history.

On the other hand, synthetic identities are also commonly used to facilitate other crimes, such as the drug trade.

For consumers, the message is unnerving: There’s really no way to prevent becoming an accidental victim in synthetic fraud. After-the-fact monitoring services can certainly help, but won’t detect all synthetic ID fraud. Annual Social Security benefit statements, for example, will not reveal that an undocumented worker is using your SSN for employment purposes and earning wage credits under that number.

“People making up Socials might accidentally use yours.” Coggeshall said. “There’s really not a whole lot people can do. You can’t protect yourself and keep this kind of fraud from happening.”

However, it’s still important to keep a close eye on your credit reports for any signs of fraud, like accounts you didn’t open. If you’re hit with identity theft or fraud, your credit score can also indicate a problem, so it helps to check those, too. You can get your credit reports for free through AnnualCreditReport.com, and you can see two of your credit scores for free on Credit.com.

More on Identity Theft:

Image: bestdesigns

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team