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Synthetic Identity Theft

A few years ago, I discovered an error on my credit report where an extra social security number (off by one digit), a new home address, and a phone bill had been added to my report. I was able to get the information removed after jumping on a few hoops but it really opened my eyes about the weaknesses in the credit reporting system. To use a bit of database-speak, I always figured social security number was the primary key for each report – meaning it was unique to each report. If someone requested a report using an incorrect social security number, why would the bureau grant it? It’s because that makes the lending process easier and because the bureau doesn’t have to answer for its mistake. Enter, synthetic identity theft.

Synthetic Identity Theft

Synthetic identity theft is a special type of identity theft. There are two versions of synthetic identity theft. The first is where the thief rebuilds your identity using bits of information from different sources. They rummage through your trash and find a canceled check, they call your place of work and find out your telephone number, they snatch your mail and grab a 1099-INT the bank mailed you. They don’t get everything all at once, but piece by piece they put it all together. This type of piece-meal ID theft, while scary, isn’t as scary as the second type.

The second type of synthetic identity theft is where the thief steals only part of your identity and merges it with other information for use in places where the checks aren’t as stringent. They may use a name that’s similar to yours in connection with part of a social security number plus your address. To be honest I’m not entirely clear how they go about doing this because I’m not a synthetic identity thief! However, the thought of someone being able to do this, even after you’ve diligently shredded up documents, is still scary.

Preventing Synthetic Identity Theft

How can you prevent this? By being smart about your identity in a way that protects you against the regular identity thieves. First, put up a solid defense by implementing my do-it-yourself identity theft protection ideas [3]. Then, follow the tips the SEC provides to prevent identity theft [4] and review the FTC’s site on identity theft [5].

Beyond that, there are a few other places you can check like your social security report. Each year, about three months before your birthday, the Social Security Administration sends you a little booklet indicating your benefits. One of the pages will list your income each year, check that the number is accurate. Extra income could be a sign that someone has stolen your identity to get a job. If you don’t correct it, you could be liable!

Lastly, fix every last mistake you see in your report, even if it improves your score! I once had a credit card that had an average revolving balance of $5,000, way more than I typically spend in a month, and had it removed. You want your credit report to accurately reflect you as a borrower. Even the smallest errors, like an incorrect address, should be addressed because it could explode into something much bigger.

I wouldn’t go as far as signing up for an identity theft program, unless you want to use their services, because they don’t necessarily add anything you can’t do yourself. I reviewed Lifelock [6] and found the service to be good, if you didn’t want to do things yourself. Remember, those packages are service packages and insurance packages, they don’t offer anything you can’t do yourself (ahh, the classic trade of time vs. money).

(Photo: nnova [7])