The Anatomy Of A Social Security Number Theft

What happens when a Social Security number is stolen? Debbie Bausch, a registered paraplanner with Clayton Financial Services Inc. in Topeka, Kan., can tell you. "A client of ours doesn't really know how he lost his Social Security number, but thinks it may have happened while in Colorado on business," says Bausch. The thief did what most identity thieves do-he used Bausch's client's name and Social Security number to open up a line of credit in another state, but put his own address on the account.

"Our client doesn't typically use his credit cards but decided to go ahead and pull his credit report anyway. By the time he discovered the line of credit, the thief had run up a balance of $22,000 and the account was in default." The client immediately followed Bausch's firm's advice to file a police report and contact the Federal Trade Commission, plus all three credit bureaus.

Although Bausch's client caught this incident early enough to preclude lengthy disentanglement efforts, this is exactly the kind of situation that causes most ID theft victims to go off the deep end. The invoices for the line of credit were going to the thief's address, hiding the existence of the credit line from Bausch's client. It could have been years before the line was discovered.

So how would the services included in LifeLock's bundle have protected Bausch's client? Very simply, the account wouldn't have been opened until the client's intention was confirmed by the bank. Yes, the thief's address was attached to the client's Social Security number on the thief's application for credit, but the client's phone number is attached to that Social Security number in credit bureau records. When a fraud alert is in effect, the bank must speak with the actual owner of the Social Security number before a new account is opened or a charge is approved.

Suppose, for example, the thief had gone to purchase a computer at Circuit City. The store clerk might ask, "Would you like to open an account with us and get 10% off your purchase?" The thief would reply in the affirmative. The store clerk would ask for the name, address and Social Security number, and the thief would provide the client's name and Social Security number and his own address. The client has a high credit score, so the credit would have been granted-unless there were a fraud alert in place.

If so, none of this would happen because the bank providing the credit line would have discovered the fraud alert during the application process and would then have telephoned the client to ask if he was opening a new credit line. The client would say "no," and the thief would have been turned away by the store clerk. If the thief were questioned by the credit bureau at the point of sale, he might be asked questions only the client would know the answers to, like, "Who's your mortgage with?" or "What address did you live at five years ago?" Either way, the thief is denied credit.

Now step back a bit, assume no fraud alerts were in place, the client had multiple credit lines opened in his name and, after several years and much time, finally succeeded in eradicating the problem. "People can clean up their mess," says Davis, "but the thief can just turn around and sell your information to someone else. I might steal your identity, sell it to 10 buyers and, a year later, sell it again." ID theft, in other words, can be a deadly virus you never get rid of.

Pre-Approved Credit Cards And Children

Let's say Bausch's client didn't have fraud alerts in place and Circuit City had granted the new credit line to the thief. That would just be the beginning, says Davis. "The store would likely grant the thief credit and, now that the stolen Social Security number is attached to the thief's address, the thief starts to get pre-approved credit card solicitations in the mail-which he responds to, accumulating even more credit."

But the real gold mine, says Davis, is getting hold of a child's Social Security number. "Thieves love using children's Social Security numbers because they can generally open an account with any name and address. The credit bureau responds saying there's no credit history and grants the request. The thief can then build up more credit lines, max them out, and the victim-a child-has no way of knowing." Thieves will break into doctors' and dentists' offices, says Davis, knowing they are likely to find files full of children's Social Security numbers.

Here's another vulnerability related to children (and adults). Do your kids, or clients' kids, have MySpace pages? Do they share music across peer-to-peer networks such as Limewire? Of course they do-those are typical online meeting places for kids.