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Detecting synthetic identity fraud

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3. Synthetic ID fraud creates file variations at the credit bureaus. The other problem is that synthetic ID fraud creates subfiles at the credit bureaus, says Hoofnagle. The term subfile, says Evan Hendricks, author of "Credit Scores and Credit Reports," refers to additional credit report information tied to a real consumer's Social Security number, but someone else's name. Because the identifying information contains some data that's already linked to a particular consumer, the subfile gets associated with the consumer's main file, or "A" file.

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Subfiles can surface when a creditor checking a consumer's credit report asks for all the possible files related to that consumer -- if they want all the files associated with a particular Social Security number.

The problem comes in when negative information gets entered under a subfile that is then linked to, but doesn't actually belong to, you. If you have good credit and derogatory information is going into your subfile, that could negatively impact your ability to get credit, he says.

Variations in credit files are natural
Extra file information is possible because of the way information gets collected and stored at the credit reporting agencies. "The algorithms allow for partial matching so they'll accept a Social Security number that's not exactly the same or a name or address that's not exactly the same as long as enough things match up," says Hendricks.

Yet variations are not always due to the work of fraudsters, says Maxine Sweet, Experian's vice president of public education.

"It's not unusual for a Social Security number to be reported to us that's associated with more than one name," she says. "In some cases it might be an indication of fraud, but in most cases it's just an indication that there were some variations in the data as it was provided to us."

She says variations can occur due to typos; for instance, when a creditor types in the information from an application to request a credit report on a consumer. Two names could also get associated with one Social Security number; for example, when a woman changes her name after marriage.

Fraudsters simply take advantage of these misspellings, typos and other natural variations and cash in on them.

What you can do about synthetic ID fraud
Consumers can employ traditional methods of detecting identity theft: ordering credit reports and checking them carefully for erroneous information and accounts that don't belong to them, and keeping an eye out for suspicious mail.

You also should make sure that creditors, if they deny you credit, based their decisions on your credit file information only.

Next: What you can do to protect yourself
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