The rising threat of synthetic identity fraud

Is it real or AI? It’s the question of the moment. In some cases, it’s fun to debate whether those really are rabbits jumping on trampolines. Other times, the consequences are far more serious. Crime rings are using AI to generate synthetic identities with real-looking driver’s licenses and enough documentation to secure credit cards and loans.

With synthetic identity fraud on the rise, let’s take a closer look at what it is and how you can protect yourself.

What is synthetic identity fraud?

A synthetic identity is a mix of real and phony information, like a child’s Social Security number paired with a fake name and address. The scammer then builds a credit history for this nonexistent being by:

• Opening a prepaid or low-barrier credit card.
• Adding it as an authorized user on a real person’s credit card.
• Applying for rental agreements, mobile plans, and government benefits.
• Creating a social media account or fake business profile to look legitimate.

It’s a long con that lasts for many months or years. The scammer makes minimum payments on the credit cards at first. Then, they ask for higher and higher limits. Eventually, they max out all the cards at once and disappear, which is called "busting out.”

Real-life victims are left with a tangled mess.

Who do scammers target for synthetic identities? Children and older adults, because they’re least likely to check their credit scores or apply for loans. This allows the scam to go undetected for years, only coming to light when the child grows up and gets rejected for an apartment lease after a credit check.

Here’s what happens:

• Credit reporting agencies may merge real and synthetic information into one file over time.
• After the scammer “busts out,” the victim’s credit score plummets.
• Some scammers also hijack their victim’s tax refunds and file for unemployment benefits.
• Now, the victim has to prove that someone who doesn’t exist opened accounts using their information.

How to protect yourself from synthetic ID fraud

Know what to look for.

Pay close attention to the mail. Look for red flags, like a credit offer addressed to your child or a name you don’t recognize. Other warning signs include being unexpectedly denied credit or getting calls from debt collectors about accounts you didn’t open.

Don’t share personal information.

Unless it’s absolutely necessary, keep personal information private, including your Social Security number. Your employer, your bank, and the IRS all need your SSN. Your gym, your child’s summer camp, and your supermarket loyalty program do not. Be especially guarded if someone contacts you unexpectedly to “verify” your information.

Note: Flagstar will never call, email, or message you and ask for your Social Security number, username, password, or two-step verification code.

Watch for data breach notifications.

If a company you do business with contacts you about a data breach, take it seriously. Change your password for that account immediately. If the company offers free credit monitoring as a result of the leak, sign up for it and keep an eye out for unauthorized accounts.

Freeze your credit.

Put a freeze on your account with all three credit bureaus—Equifax, Experian, and TransUnion —and encourage older family members to do the same. This will shut down scammers who apply for credit with your information.

Open a credit file for your child, then freeze it, too.

This requires a few more steps. You’ll need to prove your identity, your child’s identity, and that you are their legal guardian. Get all the details from Equifax.

Check your credit report and Social Security statement every year.

Even if you rarely use credit, take advantage of the free reports from annualcreditreport.com to protect your information. If you see a wrong address, unfamiliar account, or anything unusual, report it immediately to all three credit reporting agencies.

Your Social Security statement is available at ssa.gov. (You may need to create an account if you don’t already have one.) If you find income from employers you haven’t worked for, report it. Someone may be using your Social Security number for employment fraud.

Keep shredding paper documents.

It’s timeless advice: Instead of throwing it away, shred all papers with information that could be used to build a synthetic profile, especially preapproved credit card offers.