Identity theft is first and foremost a problem because we rely on numerical identifiers that attach humans to credit and a variety of services. Once a criminal gets hold of those identifiers, he can simply be you. But when that thief takes on those numerical identifiers and attaches another name or date of birth, he confuses the already broken system further and creates what is called synthetic identity theft.
Synthetic identity theft happens when a person’s identity is partially or entirely fabricated in some way. What defines it as synthetic is when a criminal uses a real Social Security number with another person’s (or fake person, i.e. synthetic) and combines it with a name and date of birth that’s not associated with the number via the credit bureaus or anywhere else. This is a hard type of fraud to discover because the fraud rarely appears on the victim’s credit report or on the perpetrator’s credit report because it’s a fake person. With synthetic identity theft, the criminal often succeeds in creating a new credit file—or, in some cases, a subfile—that may end up on the victim’s credit.
Synthetic identity theft is a problem for victims, of course, but creditors take an even bigger hit. Creditors that grant credit based on fake records and fake people have little recourse. But it also complicates things for individual victims if their names become associated with synthetic identities, like when credit scores are negatively affected because of information in a fraud-based subfile.
Identity theft protection might pick up your SSN with a different name when it’s used for credit. But if it doesn’t catch it, then the restoration component may also help to clean up the mess.