Frankenstein Fraud Is on the Rise—Here’s How Synthetic Identity Theft Works

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Most people think of identity theft as someone stealing your Social Security number to open credit cards or drain your bank account. But a more advanced and dangerous scheme is rising fast—synthetic identity fraud, or “Frankenstein fraud.”

Unlike traditional ID theft, this scam combines bits of real and fake information to create a completely new, fake person. These fake identities can fly under the radar for months or years, building credit profiles, securing loans, and then “busting out”—defaulting and disappearing.

🔍 How the fraudsters operate:

They use real data (often a child's SSN or a deceased person’s information) stitched together with fake names, emails, and phone numbers.
Fraudsters apply for credit, get rejected, and then keep applying until a bureau creates a file for this synthetic person.
Over time, they build good credit behavior, secure real financing, and then vanish—leaving banks and lenders with the loss.

🚩 What red flags are missed:

Credit bureaus can’t distinguish between a real thin file and a fake one.
No single identifier (like a phone number) is validated in context—just recorded.
Lenders and dealers often skip deeper identity verification during the prequalification process.

💸 Who pays the price:

Banks, credit unions, and auto lenders are losing billions annually.
Consumers may not know they’ve been implicated until years later.
Retailers and dealerships, especially in auto finance, are left with unpaid loans and inventory loss.

🛡 What could have stopped it:

Real-time identity verification at the front of the funnel—not just credit data checks.
Cross-validation of personal identifiers (SSN, phone, address) against credit bureau and telecom records.
Stopping synthetic identities before a file is created, not after damage is done.

🧠 VeriQual Insight:

Frankenstein fraud thrives in systems that separate identity verification from credit qualification. VeriQual solves this by combining both into a single, secure step—confirming that the person behind the phone number is real and creditworthy. It’s not just about better leads. It’s about stopping synthetic identities cold—before they ever touch your CRM.