Learn What is Synthetic Identity Theft & How to Protect Yourself

Identity theft has long been a serious threat, but a newer and more complex form is rapidly gaining ground—synthetic identity theft. Unlike traditional identity theft, where a fraudster steals someone's entire personal profile, synthetic identity compilation involves using a combination of real and fake information to create a new identity. 

Criminals often use details like a stolen SSN and pair it with fabricated data such as a false identity, date of birth, or fake addresses. This allows them to create synthetic identities that are used to open bank accounts, apply for loans, and commit fraud without being easily detected.

Because these synthetic identities blend real and fake identities, they can go unnoticed for months or even years, making them one of the hardest forms of regular identity theft to detect. With more personally identifiable information being sold on the dark web, fraudsters are finding it easier to create a synthetic identity to take and manipulate credit reports, credit scores, and credit histories. As a result, victims often discover the damage long after the identity manipulation has occurred.

To protect yourself from becoming a victim of synthetic identity theft, it's crucial to understand how this type of fraud works and take proactive steps, such as monitoring your credit report, using identity theft protection, and securing your online accounts with stronger identity verification. Learn how to prevent synthetic identity theft and safeguard your personal information before it’s too late.

Identity theft comes in many forms, with synthetic identity theft being one of the most dangerous. Here’s how it works and how to protect yourself:

• Traditional identity theft involves stealing an entire identity (name, Social Security number, etc.).
• Synthetic identity fraud occurs when criminals use a mix of real and fake identity details to create a new, fictitious identity.

• Creating a Fake Identity:
  
  • Criminals combine real information (e.g., Social Security number) with fabricated details (like a false name or date of birth) to create an entirely new identity.
  • This synthetic identity is used to open bank accounts, apply for credit, or access services.
• Building Credit:
  
  • Over time, fraudsters build up the credit profile of the synthetic identity, making it appear legitimate.
  • They then use the synthetic identity for large-scale fraud, such as maxing out credit cards or applying for loans.

• • A criminal creates a synthetic identity by using a stolen Social Security number and fake personal details.
  • They build good credit with this identity, then take out loans or credit, leaving the victim unaware until it’s too late.

• Warning Signs:
  
  • Accounts or loans appearing on your credit report that you didn’t open.
  • Receiving bills or statements for services you didn’t apply for.
  • Unfamiliar hard inquiries on your credit report, indicating someone used a synthetic identity to apply for credit.
• Monitoring:
  
  • Regular credit checks and identity monitoring services can help you detect synthetic identity fraud early.

Synthetic identity theft is a sophisticated type of fraud that differs from traditional identity theft. Here's a breakdown to make it easier to understand:

• Traditional identity theft involves stealing an entire identity (e.g., your name, SSN, and other personal data) and pretending to be you.
  
• Synthetic identity theft combines real personal information (like your SSN) with fake details (such as a made-up name, address, or birthdate) to create a completely new, false identity.

• Criminals use fictional identities made from a mix of real and fake data.
  
• A fraudster might use a real SSN (often stolen from a child or an unmonitored account) and combine it with fake information to make the identity seem real.
  
• This new identity, called a synthetic identity, doesn't belong to a real person but can still be used for fraud.

• Criminals obtain SSNs through data breaches, the dark web, or phishing schemes.
  
• SSNs from children or people who don’t frequently check their credit are ideal targets because they have little to no credit history.

• The fraudster pairs the real SSN with a fake name, a fabricated date of birth, and a random or stolen address.

• The criminal applies for small lines of credit (like low-limit credit cards or loans) to build a credit score for the synthetic identity.

• Once the synthetic identity has a good credit score and credit history, the criminal takes out larger loans, maxes out credit cards, or even opens bank accounts using the fake identity.

• Blended identities: Since synthetic identities are made of both real and fake information, they look legitimate and can pass basic identity verification checks.
  
• No one monitoring the credit: Because the identity is fake, there's no real person checking credit reports, making it easier for criminals to use the synthetic identity undetected.
  
• Delayed detection: Victims may only realize there's a problem when serious damage, like a significant drop in their credit score, has already occurred.

Synthetic identity theft is becoming one of the fastest-growing forms of fraud, and it’s affecting more people than many realize. Here’s why it’s a growing threat and why it’s so difficult to detect:

• Rapid Rise in Cases: Over the past few years, synthetic identity theft has exploded, accounting for about 80% of all credit card fraud in the U.S., according to the Federal Reserve. This makes it one of the most common forms of identity fraud today.
  
• Billions in Losses: Financial institutions lose billions each year due to synthetic identity theft. A report from Aite Group estimated that synthetic identity fraud cost U.S. lenders $6 billion in 2016 alone, and the number continues to rise each year as fraudsters become more sophisticated.
  
• Targeting Vulnerable Groups: Children, the elderly, and people with little or no credit history are common targets because their SSNs are often unused and unmonitored. In fact, a study by Carnegie Mellon University found that children are 51 times more likely to become victims of synthetic identity theft than adults.
  
• Impact on Consumers: For consumers, this means more fraudulent accounts popping up in their names, higher credit card interest rates, and even difficulties securing loans or mortgages because their credit score has been ruined by fraud they didn’t even know was happening.

Synthetic identity theft is much more difficult to detect than traditional identity theft for several reasons:

• Blending Real and Fake Data: Because a synthetic identity is made using a combination of real personal information (like a legitimate SSN) and fake details (like a made-up name or date of birth), it often flies under the radar. Banks and credit bureaus see the real SSN and assume it belongs to the person applying for credit, especially if the fraudster has been careful to build a believable credit profile.
  
• No Immediate Victims: In traditional identity theft, the real person whose information was stolen usually notices the fraud fairly quickly—whether it's a suspicious charge on their bank account or an unexpected drop in their credit score. But with synthetic identity theft, the identity thief is using a fake identity, so there’s no real person actively monitoring their credit report or looking for strange activity. This allows the fraud to continue unchecked for long periods, sometimes years.
  
• Delayed Detection: One of the reasons this type of fraud is so damaging is that it often takes a long time to discover. Since the identity is partly fake, no one may notice unusual activity until the fraudster has already taken out loans, maxed out credit cards, or caused significant damage to a credit score. For children and young adults, the theft may not be detected until they apply for their first credit card or student loan, only to find out their credit history has been destroyed.
  
• Tricks Financial Systems: Synthetic identities can trick even sophisticated financial systems. Fraudsters use these identity fabrication to apply for credit, slowly build a good credit history, and then eventually take out larger loans or max out credit cards, leaving banks and lenders with the financial losses. Because the fraudster doesn’t steal directly from an existing bank account or credit card, it’s harder for banks and credit monitoring services to flag the suspicious activity.
  
• Lack of Awareness: Many consumers aren’t aware of synthetic identity theft, which makes it even easier for criminals to take advantage. People might check their bank statements for fraud but often don’t monitor their SSN or credit report until it’s too late.

Synthetic identity theft may sound complicated, but understanding how criminals create these fake identities can help you protect yourself. By knowing where they get your information and the steps they take to build these identities, you can better spot the warning signs before becoming a victim.

Cybercriminals rely on several methods to get the personal information they need to create synthetic identities. Here are some of the most common sources:

• Data Breaches: One of the largest sources of stolen personal data comes from data breaches. When companies are hacked, sensitive information like Social Security numbers (SSNs), dates of birth, and addresses can be stolen and sold to criminals. You may have heard of major breaches from companies like Equifax or large retailers where millions of people’s data was exposed.
  
• Dark Web Marketplaces: Once criminals obtain personal information, they often sell it on the dark web—an online marketplace for illegal goods. On the dark web, fraudsters can buy stolen SSNs, credit card information, and even medical records for a small price. This data is key for criminals looking to create synthetic identities.
  
• Phishing Attacks: Cybercriminals use phishing attacks to trick people into revealing personal information. They might send fake emails pretending to be from your bank or a government agency, asking you to verify your account by providing your SSN, passwords, or other details. Once they have this data, they can use it to build a fake identity.
  
• Stealing from Vulnerable Targets: Fraudsters often target children, the elderly, or people who don’t frequently check their credit. For instance, child identity theft is common because children typically don’t have credit histories, making their SSNs valuable for creating synthetic identities.

Once a criminal has gathered enough personal data, they can begin the process of building a synthetic identity. This is typically done in several steps:

1. Collect a Real Social Security Number (SSN):
   
   • The process begins with obtaining a real SSN, often one stolen from a data breach or bought on the dark web. The SSNs of children, the elderly, or people who don’t use credit often are ideal because they are less likely to be monitored.
     

2. Add Fake Information:

• • After securing an SSN, the fraudster pairs it with fake information, like a false name, birthdate, and address. This fake identity is built around the real SSN, but everything else is made up.
    
  • This combination of real and fake data makes it hard to detect because credit agencies and banks see the SSN as legitimate.

3. Apply for a Small Line of Credit:

• • The next step is to apply for a small line of credit. At first, criminals may open a low-limit credit card or take out a loan with a small amount of money. If the application is successful, this starts building a credit history for the synthetic identity.
    
  • Even if the initial application is rejected, many criminals will keep applying until they are approved by a bank or lender that doesn't catch the synthetic identity.
    

4. Build a Credit Profile:

• • Over time, the fraudster continues to apply for and use credit under the fake identity. They might open more accounts, make small purchases, and pay off the balances on time. This slow buildup of good credit strengthens the synthetic identity’s credit profile and makes the identity appear more legitimate to financial institutions.

5. Commit Large-Scale Fraud:

• • Once the synthetic identity has a good credit score and a clean credit history, the criminal begins to take out larger loans, max out credit cards, or apply for high-value purchases like cars or homes. At this point, they stop paying back the debts, leaving the financial institutions to deal with the losses.
    
  • The fraudster can also use the synthetic identity to open bank accounts, apply for medical services, or even file fraudulent tax returns.

Recognizing the warning signs of synthetic identity theft can be tricky because this type of fraud is designed to go unnoticed for as long as possible. However, there are certain red flags that could indicate someone is using a synthetic identity in your name. Let’s look at what you should watch for to protect yourself.

One of the first signs that something might be wrong is unusual activity on your credit report. While criminals using synthetic identities often blend fake details with real ones, they may still connect part of their fake identity to your SSN. This can trigger credit-related activities that don’t make sense for you. Here are a few things to keep an eye on:

• Accounts You Didn’t Open: If you notice unfamiliar accounts on your credit report—like credit cards, loans, or even utilities in your name—it’s a major red flag. These accounts might have been opened under a synthetic identity using your SSN or other personal information. Even if the rest of the account details (like the name and address) don’t match yours, the fraudulent activity is tied to your credit history.
  
• Hard Inquiries from Banks or Lenders: Every time someone applies for credit in your name, the bank or lender checks your credit report. This is known as a hard inquiry. If you notice hard inquiries from companies you’ve never applied to—whether it’s for a credit card, loan, or mortgage—it could mean a fraudster is trying to use your information to establish a synthetic identity. Each hard inquiry can slightly lower your credit score, so spotting them early is important.
  
• Sudden Changes in Your Credit Score: A sudden drop or spike in your credit score could be a sign of trouble. A decrease might indicate that someone using your SSN has missed payments or maxed out credit cards you didn’t know existed. Even an unexplained rise in your credit score could mean that someone has been building a credit history with a synthetic identity linked to your information.

One of the scariest parts about synthetic identity theft is that it often goes unnoticed for a long time. Here’s why:

• No Immediate Victim: With traditional identity theft, the real person whose identity was stolen often discovers the fraud fairly quickly. Maybe they get a call from their bank about suspicious activity, or they notice fraudulent charges on their credit card. But with synthetic identity theft, the fake identity often doesn’t trigger any alerts because no real person is actively monitoring the credit activity tied to it.
  
• Criminals Build Slowly: Fraudsters creating synthetic identities don’t jump straight into large-scale crimes. Instead, they start small, applying for low-limit credit cards or other minor accounts that fly under the radar. Over time, they build up a strong credit history using the synthetic identity, making it harder to catch until they eventually take out large loans or max out credit accounts.
  
• Years of Fraud: Synthetic identity theft can go on for years without detection. Since the identity is partly fake, no real person is watching the credit report closely. Many victims, such as children, don’t find out they’ve been affected until they try to apply for their first credit card, student loan, or even a job. By then, the damage has been done, and cleaning up the mess can be incredibly difficult.

Protecting yourself from synthetic identity theft might seem challenging, but by taking a few simple steps, you can significantly reduce the risk of becoming a victim. Let’s look at how you can safeguard your personal information and prevent criminals from using your identity.

The most important step you can take is to regularly monitor your credit reports. This helps you spot any suspicious activity before it becomes a bigger problem. Here’s why it’s so important:

• Catch Fraud Early: By checking your credit report, you can quickly see if there are any accounts you didn’t open, unexpected loans, or credit cards that have been taken out in your name. Spotting these early can prevent them from causing major damage to your credit score.
  
• Free Credit Reports: You are entitled to a free credit report from each of the three major credit bureaus—Equifax, Experian, and TransUnion—every year. Some services also allow you to check your credit score for free, which can help you see if there are any unexplained changes.
  
• What to Look For: When reviewing your credit report, keep an eye out for unfamiliar names, hard inquiries from companies you didn’t apply to, and new accounts you don’t recognize. If something doesn’t look right, it could be a sign that someone has used your information to create a synthetic identity.

Another effective way to protect yourself is by setting up fraud alerts or using a credit freeze. These tools make it much harder for criminals to open new accounts in your name.

• Fraud Alerts: When you place a fraud alert on your credit file, it tells potential lenders that they should take extra steps to verify your identity before issuing credit in your name. This can help stop criminals from using your information to create new accounts. Fraud alerts are free to set up and last for one year, but you can renew them if needed.
  
• Credit Freezes: A credit freeze goes one step further by locking your credit file, preventing anyone—including you—from opening new credit accounts until the freeze is lifted. This is one of the most powerful tools for protecting yourself from synthetic identity theft because it blocks criminals from using your SSN to open accounts. The good news is that you can still use your existing credit cards and accounts while your file is frozen.
  
• How to Freeze Your Credit: You can freeze your credit for free by contacting the three major credit bureaus (Equifax, Experian, and TransUnion). If you ever need to apply for new credit, you can temporarily lift the freeze.

Your Social Security number (SSN) is a key target for criminals looking to create synthetic identities. Protecting your SSN is critical to keeping your identity safe. Here’s how you can do that:

• Don’t Carry It Around: Avoid carrying your Social Security card in your wallet. If your wallet is lost or stolen, a thief could use your SSN to commit identity theft. Keep your card in a secure place at home.
  
• Only Share When Absolutely Necessary: Be careful about who you give your SSN to. Many businesses and organizations ask for it, but not all of them need it. For example, most health care providers or landlords don’t need your SSN. Always ask why it’s needed and if there’s another form of ID you can use instead.
  
• Shred Documents with Personal Information: When throwing away documents that contain your SSN, make sure to shred them. This prevents criminals from dumpster diving and getting their hands on your personal information.

In addition to being vigilant on your own, using identity theft protection services can provide an extra layer of defense. These services monitor your personal information and alert you to any suspicious activity.

• Credit Monitoring: Services like credit monitoring will notify you if there are any significant changes to your credit report, such as new accounts or credit inquiries. This allows you to catch potential fraud early and take action before it causes major damage.
  
• Identity Theft Protection: Some identity theft protection services go beyond just monitoring your credit. They can also monitor the dark web to see if your personal information—like your SSN—has been stolen and is being sold. If they detect anything suspicious, they’ll alert you immediately.
  
• Insurance and Recovery Help: Many identity theft protection services also offer insurance that can help cover the costs of recovering from identity theft. They may also provide support in helping you deal with banks, creditors, and credit bureaus to restore your credit history if you do become a victim.

Discovering that you’ve become a victim of synthetic identity theft can be stressful and confusing, but taking immediate action can help limit the damage. Here are the key steps to follow if you suspect someone has used your information to create a synthetic identity.

The first step is to notify the major credit bureaus—Equifax, Experian, and TransUnion—about the fraudulent activity on your credit report. Here’s how to go about it:

• Request Your Credit Reports: Start by requesting your free credit report from each of the three bureaus. Look for accounts, loans, or hard inquiries that you don’t recognize. These may be signs that a fraudster has used your SSN or other personal information to open accounts under a synthetic identity.
  
• Dispute Fraudulent Activity: If you find anything suspicious, contact the credit bureaus to dispute the fraudulent accounts or activity. Each bureau has an online portal for filing disputes, or you can write to them directly. Be sure to provide copies of documents that support your claim (e.g., police reports, written statements). The credit bureaus are required by law to investigate your dispute within 30 days.
  
• Place a Fraud Alert: Once you’ve reported the fraud, consider placing a fraud alert on your credit file. This will make it harder for criminals to open new accounts in your name because lenders will be required to take extra steps to verify your identity. A fraud alert lasts for one year but can be extended if needed.
  
• Consider a Credit Freeze: For stronger protection, you can place a credit freeze with each bureau. This locks your credit file, preventing anyone from opening new credit accounts in your name until you lift the freeze. It’s free and one of the best ways to stop further damage from synthetic identity theft.

After addressing the credit bureaus, the next step is to contact any financial institutions where the fraudulent activity occurred. Here’s what to do:

• Notify Your Bank or Credit Card Company: If your bank account or credit card has been affected, contact your bank or credit card company immediately. They will help you close any fraudulent accounts and may issue you new account numbers or credit cards. Be sure to ask for written confirmation of any actions taken on your account.
  
• Close Fraudulent Accounts: If a criminal has opened loans, lines of credit, or accounts under your name, you’ll need to work with the banks or lenders involved to close these fraudulent accounts. Explain that you’ve been a victim of identity theft and ask them to provide you with any documents or evidence related to the fraudulent accounts, which can help in your dispute process.
  
• Change Account Information: For added security, consider changing passwords, PINs, and other sensitive information related to your existing accounts. This will make it more difficult for criminals to access your accounts in the future.

The Federal Trade Commission (FTC) is the main government agency that handles identity theft complaints in the U.S. Filing a report with the FTC helps create an official record of the fraud, which can be useful when disputing activity with credit bureaus or financial institutions.

• Visit IdentityTheft.gov: Go to IdentityTheft.gov, which is the FTC’s website for reporting identity theft. Here, you can file an identity theft report and create a recovery plan tailored to your specific situation.
  
• Create an Identity Theft Affidavit: After filing your report, the website will help you generate an identity theft affidavit. This document is essential when disputing fraudulent accounts or activity with credit bureaus and financial institutions. It serves as proof that you are the victim of identity theft.
  
• Consider Reporting to Law Enforcement: In some cases, especially if the fraud is large-scale or involves criminal networks, you may also want to file a report with your local police or another law enforcement agency. Having a police report can further support your disputes and provide additional documentation to help clear your name.

While working through these steps, there are a few other things you can do to protect yourself and reduce the risk of further damage:

• Monitor Your Credit Regularly: Even after resolving the initial issues, keep a close eye on your credit reports to catch any new signs of fraud. Consider using credit monitoring services that alert you to changes in your credit report in real time.
  
• Keep Detailed Records: Throughout this process, keep copies of all correspondence, including letters, emails, and documents you send or receive from credit bureaus, banks, and the FTC. This documentation will be essential if you need to escalate your disputes or prove your case later on.
  
• Change Online Account Passwords: If your personal information has been compromised, it’s a good idea to update passwords for your online accounts, especially sensitive ones like banking, email, and social media. Use strong, unique passwords for each account, and consider enabling two-factor authentication for added security.

Synthetic identity theft doesn't just harm individuals—it also poses a major threat to businesses and financial institutions. Criminals use fake identities to open accounts, take out loans, and make purchases, often leaving companies to deal with the financial losses. That’s why businesses play a key role in preventing this type of fraud. By adopting stronger verification processes and working closely with credit bureaus, companies can help stop synthetic identity theft before it happens.

One of the most effective ways businesses can prevent synthetic identity theft is by strengthening their identity verification processes. Here are a few ways they can do that:

• Multi-Factor Authentication (MFA): One of the best ways to protect against fraud is by using multi-factor authentication (MFA). This method requires users to provide two or more types of identification before accessing an account or completing a transaction. For example, a company might ask for a password and then send a one-time code to the user’s phone for extra security. By adding this second layer of protection, businesses can make it much harder for criminals to use synthetic identities to bypass security checks.
  
• Stricter Credit Application Reviews: Businesses, especially lenders, can reduce the risk of synthetic identity theft by applying stricter verification rules during the credit application process. Instead of relying solely on basic information like a SSN and name, companies should verify multiple details, such as matching the applicant’s address and date of birth with trusted records. Additionally, reviewing applicants’ credit history more thoroughly can help spot inconsistencies that could indicate a synthetic identity is being used.
  
• Biometric Verification: Another way companies can strengthen security is by incorporating biometric verification methods, such as fingerprint scanning or facial recognition. These methods make it difficult for criminals to create fake profiles because they rely on unique physical traits that can’t be easily forged.

Businesses don’t operate in isolation when it comes to preventing synthetic identity theft—they need to work closely with credit bureaus to detect fraud early. Here’s how this collaboration can help:

• Sharing Data on Suspicious Activity: When businesses detect suspicious activity, they can report it to the credit bureaus. For example, if a company notices multiple credit applications from someone with inconsistent information, they can alert the bureaus to investigate further. This helps identify potential synthetic identities early and can stop fraud before it escalates.
  
• Flagging Inconsistent Data: By collaborating with credit bureaus, businesses can access data across multiple accounts and industries. If different pieces of information—like a SSN and date of birth—don’t match up across credit reports, that might be a red flag for a synthetic identity. When businesses and credit bureaus share this kind of data, it becomes easier to detect fraud patterns that a single company might miss.

Artificial intelligence (AI) and machine learning are being used more and more to detect fraud, including synthetic identity theft. These technologies can analyze vast amounts of data in ways that humans simply can’t, identifying patterns and behaviors that might indicate fraudulent activity. Here’s how they help:

• Detecting Unusual Patterns: AI can sift through large amounts of customer data and flag unusual patterns that suggest fraud. For example, AI might notice that a certain SSN is being used with multiple names and addresses across different accounts—something that could signal a synthetic identity. The system would then alert businesses and credit bureaus, allowing them to investigate further.
  
• Real-Time Fraud Detection: Unlike manual reviews, AI can work in real-time, analyzing data as soon as it’s entered into a system. This means that when someone applies for a loan or credit card, AI can instantly check for signs of identity manipulation and stop the transaction before the fraudster can get away with it.
  
• Learning Over Time: One of the best features of machine learning is that it gets smarter over time. As AI systems detect more cases of fraud, they learn to recognize new tricks that criminals might use to create synthetic identities. This continuous improvement helps businesses stay ahead of the latest fraud techniques.

Another technology showing promise in the fight against synthetic identity theft is blockchain. You might have heard of blockchain in connection with cryptocurrencies like Bitcoin, but it has other uses, including securing personal data and improving identity verification.

• Immutable Data Records: Blockchain technology creates secure, unchangeable records that can’t be altered or tampered with. When it comes to identity verification, this means that once a person’s information is verified and stored on a blockchain, it becomes much harder for criminals to fake or manipulate. For example, a legitimate SSN and corresponding personal details could be safely stored on a blockchain, making it more difficult for someone to create a synthetic identity using that number.
  
• Decentralized Verification: Instead of relying on a single company or organization to verify identities, blockchain allows for decentralized verification. This means that different entities—like banks, credit bureaus, and government agencies—can all contribute to and access a shared, secure network. With more checks in place across multiple systems, it becomes much harder for criminals to slip through with fake identities.

Synthetic identity theft is a complex and growing threat, where fraudsters use synthetic identities—a mix of real and fake information—to commit financial fraud. Unlike traditional identity theft, where a criminal steals a real identity, synthetic id theft involves creating an entirely new, partially fake identity. This type of fraud is difficult to detect, allowing synthetic identity thieves to cause serious damage before being caught.

To protect against synthetic identity theft, it’s crucial to stay proactive. Regularly check your credit reports for signs of unusual activity, invest in identity theft protection services, and be cautious with your personal information. By taking these steps, you can help prevent synthetic identity fraud and reduce the risk of becoming a victim of synthetic identity fraud.

Start protecting your identity today by monitoring your credit, using identity theft protection, and being alert to the signs of synthetic identity fraud. The earlier you act, the safer your identity will be from this growing threat!