There are generally 2 types of financial identity theft. New account fraud and account takeover.

New account fraud Identity theft can occur when someone opens a new credit card in your name, maxes it out, and doesn’t pay the bill.

Account takeover Identity theft can also occur when a bad guy gets your information, uses it to take over your existing credit or bank accounts, and drains your funds.

But then there is “ghosting”. ID fraud happens when new accounts are opened under names and identities that have been entirely fabricated when thieves easily create fake Social Security numbers.

Here’s how it works. Our system of credit requires a Social Security number as the first and foremost identifier. Lenders issue credit based entirely or almost entirely on the history associated with an applicant’s Social Security number.

When a creditor issues credit based on these invented numbers and reports that information to the credit bureaus, the Social Security numbers become active identifiers that other creditors will recognize in the future. The thieves, now equipped with functional Social Security numbers, can use them to open numerous new accounts.

That first creditor who issued credit to a ghost identity with a newly created Social Security number may have had someone on the inside of the credit issuing organization submitting fraudulent payment or loan information in order to legitimize the fake number.

Businesses who issue credit may unknowingly facilitate these scams if they have employees on the inside who manipulate the system. Never leave employees unsupervised without some form of redundant checks and balances system in place. At least run Social Security numbers through the Social Security Administrations Verification Service to prevent Identity theft. Business scams like these eat at the foundation of credit and cost companies and consumers billions a year.

Robert Siciliano personal and small business security specialist toADT Small Business Security discussingADT Pulse on Fox News. Disclosures

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