01:00 AM EST on Sunday, January 29, 2006

BY PAMELA YIP

You know what identity theft is: It's when a fraudster gets hold of your personal information -- such as your name, Social Security number and bank account or credit card number -- and racks up thousands of dollars of debt in your name.

Now watch out for identity manipulation and synthetic identities.

Edentify Inc., a Pennsylvania-based identity fraud detection firm, says identity manipulation is an insidious and fast-growing form of identity fraud.

It defines identity manipulation as the "intentional modification of identity records for the purposes of deceiving."

"The fraudster is looking to try to change the information enough so that whoever is looking at it from the surface will see it as something different, but the authentication process will match it as something already existing," said Terrence DeFranco, chairman and chief executive officer of Edentify.

"The intent is to try to appear as someone different and still have the ability to retrieve some of the benefits associated with the same identity," he said.

ID Analytics Inc. of San Diego, which sells identity-fraud detection products to businesses, reported last year that it has far-reaching consequences.

"We know that the problem is still out there, and especially in the wireless community and mobile community," said Mike Cook, co-founder of ID Analytics.

Let's see how it works by considering the case of Jesse James, a fictitious victim with a Social Security number of 123-45-6788.

An identity manipulator might try to get credit in his name by using the name Jim Jesse or Jamie Jessie and the Social Security number 123-45-6798.

The names would be close enough in the eyes of credit bureaus' authentication systems that they would pull up the good credit information of Jesse James, Edentify officials say.

"They have a pretty good tolerance built in," said Thomas Harkins, chief operating officer of Edentify. "They get so many errors and so many typos that if they had to match 100 percent, they would always be going back and saying, 'We've found something wrong.' "

The credit bureaus' systems for granting credit allow so much tolerance that once the new name is established, creditors have a tough time tracking down the real Jesse James, SSN 123-45-6788, let alone any Jamie Jesse, SSN 123-45-6798.

That gives the criminal more time to perpetrate his scam.

"By the time the identity thief [victim] and creditors find out, that gives the thief additional time to use the identities he's manipulated," Harkins said. "Every day and every hour is worth thousands of dollars to the criminal."

Officials at Equifax, one of the three national credit bureaus, say that while their computer systems do allow for some typos and variations, "it's not a wide allowance."

"We do return warnings to the credit grantors, which may tell them the Social is out of range or the address is different," said Dave Amster, vice president of data security and compliance at Equifax.

Federal law requires credit bureaus to issue a warning to lenders when an applicant's address "varies widely, and the lenders have to verify the consumers' identity," he said.

What consumers can do is watch the mail and check their credit reports regularly.

"They should be attentive to anything out of the ordinary that they receive in the mail or that's on their credit report," said Joanna Crane, manager of the Federal Trade Commission's Identity Theft Program.

"If they start getting offers of credit in a name that's similar to theirs, but isn't theirs, they should take a look at their credit report."

It's for just this reason that federal law entitles every American to a free copy of their credit report once a year from each of the three major credit bureaus.

Go to www.annualcreditreport.com and avoid any solicitations that suggest you have to pay for your credit report.

Pamela Yip is a personal finance writer for The Dallas Morning News and can be e-mailed at pyip@dallasnews.com