“Synthetic identity fraud” isn’t a term that’s batted about much in the news, but it may be the biggest problem facing Americans today. The Federal Trade Commission (FTC) says that nearly 85% of all identity theft cases are actually synthetic – meaning that a fraudster creates a new identity using a combination of real and fake information.
This might include using a real Social Security number (SSN) along with a fake name and address or using a real name and address with a fake SSN. The goal is to create an identity that appears legitimate to financial institutions and government agencies, which can then be used to open new accounts, apply for loans, get a credit card, buy a car, collect unemployment, or commit other forms of fraud.
“Think of it as Frankenstein fraud since thieves piece together information from different people to create one new identity,” the Security.org team said in a new report covering the issue.
The biggest targets are children
Children are excellent targets for synthetic ID fraud because they are basically unmonitored in the world of consumerism, with no real credit history for a creditor to take a look at.
“[Fraudsters] prefer numbers issued in the past 18 years since they’re likely to belong to minors. Children typically don’t apply for loans or credit until age 18, giving criminals ten or even 15 years to wreak havoc before anyone notices,” the researchers said.
The sad thing is that if a child’s SSN has been purloined by a fraudster, by the time they go out in the real world, their creditworthiness could be laid to waste. Student loan? Forget it. New home? Forget it.
According to Security.org’s report, two out of every three parents are clueless about synthetic identity fraud. Most never check their children’s credit reports or use credit monitoring services to track their children’s credit activity.
How the game is played
The moment an identity thief gains access to a Social Security number, they’re off to the races. Step number one is applying for credit online. And if they’re turned down? No biggie. And if they apply for $1,000 credit line and only get $500, no great loss there because they’re $500 richer, and if they’re smart, they pay the $500 off on time so they can start a credit history – one which will eventually bring in larger credit limits.
At a point where an ID thief amasses $10,000 to $15,000 worth of credit, a “bust out” occurs, and the perpetrators go on a shopping spree, then – poof! – evaporate from the credit scene, no longer worrying about debt. After all, those things they bought on their way out aren’t really attached to their credit history, but some 10-year-old kid in Paducah, Ky. whose SSN they stole.
And parents will know their child is a victim quickly, too. They’ll start to get documents relating to unemployment benefits you never applied for, credit card offers in the mail, and maybe even a letter from the IRS about delinquent taxes or notices that your government benefits application or student loan application has been denied.
How parents can protect their kids’ SSNs
The Security.org team said the first box parents should check is limiting the number of places where their child’s SSN appears. For example, you might keep the physical card with the number in a locked file drawer and perhaps keep a password-protected computer file with the number.
Other tips to protect your child’s data include:
Don’t give out SSNs whenever requested. Camps, caregivers, and schools must have a good reason to ask for kids' SSNs. Often, they do not, so leaving SSN fields blank is a parent’s right.
Be very selective about who can access personal data. The researchers said that more often than not, victims of synthetic identity theft know the perpetrator. It could be the parent of a friend or a weird uncle, but locking up a kid’s Social Security card and number can help protect their identity.
Check with your child’s school about their cybersecurity policies and encourage them to strengthen their standards. Also, find out how they protect your child’s data during online educational activities.
Teach your kids what’s appropriate to share when chatting with people online: Explain to your kids that they should not share home addresses, phone numbers, SSNs, and other data online, and monitor their online activities.
Check your child’s credit score – maybe even set up monitoring their credit. Better safe than sorry. And, remember, credit scores are free.
And if your child’s SSN is stolen and winds up in the hands of a synthetic identity thief? The first thing to do is to go to identitytheft.gov to get started on a recovery plan. There, you can pick and choose the situation that fits you best. For example, if someone files a federal tax return using your information or used your (or your child’s) details to file for unemployment insurance.
Also, contact all the companies where you know fraud happened. “When contacting the company or firm where the fraud occurred, explain that someone stole your child's identity and opened fraudulent accounts,” the researchers suggested.
“Say your child is a minor and cannot enter legal contracts. Have the company close the account and send a letter confirming your child is not liable for the account, and always note who you talked to and the times of your conversations.”