Since this synthetic identity is based on some real information, and sometimes upon artfully created credit histories, it can be used to apply for new credit accounts. This harms consumers because it creates subfiles at the CRAs, and the real owner of the SSN is sometimes targeted by collections efforts.

According to Mike Cook of ID Analytics (PDF), a company that specializes in reduction of fraud risk, synthetic fraud "is a larger problem than identity theft and is growing at a faster rate." Because "the combination of the name, address and Social Security number do not correspond to one particular consumer, the fraud is unreported and often goes undetect...financial losses stemming from synthetic identity fraud are difficult for organizations to label as fraud when the approved account becomes delinquent and eventually charges-off as a loss."

So, in synthetic identity theft, the bad guy doesn't merely create a new account in your name only, the bad guy establishes a new synthetic victim, with multiple personalities is created. This means it takes longer for you to find out you've been victimized, making it harder for you to clear your name. The solution is complex, but holding companies to higher standards for granting credit and protecting our information are certainly significant parts of the answer.