Credit Washing and Synthetic ID Fraud Hit All-Time High

Synthetic identity and credit washing fraud have hit another record high and are showing no signs of slowing down. From auto loans to personal credit, fraudsters are fabricating identities, building believable credit histories before vanishing with high-ticket loans.

See Also: New Attacks. Skyrocketing Costs. The True Cost of a Security Breach.

Unscrupulous credit repair companies are adding to the problem by convincing people in debt to create new identities using unissued Social Security numbers to erase poor credit histories.

According to TransUnion’s H2 2024 State of Omnichannel Fraud report, U.S. lenders suffered a record $3.2 billion in losses related to synthetic identity fraud by mid-2024. The proportion of new accounts associated with synthetic identities surged by 18% over the previous year, affecting a variety of lenders ranging from auto loans to unsecured personal credit.

The report attributes the rise to the availability of stolen credentials and increasingly sophisticated identity fabrication techniques. The most common tactic involves using synthetic identities to take out auto loans. The balances in synthetic identity-linked auto loans are double those found in bank credit card fraud cases, underscoring a trend in which fraudsters are pursuing big-ticket items to maximize returns before the lender charges off the loan.

Auto lenders suffered losses of $2.1 billion from loans granted to entirely fictitious identities. Notably, auto lending was the only sector in which synthetic identity-related losses continued to climb.

Fraudsters use credit privacy numbers, or CPNs, to create new personas, sometimes recycling the same identity across multiple states. With emerging threats such as AI-generated fake documents, deepfake impersonation and fraud-as-a-service models flourishing on Telegram, the line between cybercrime and credit fraud is blurring, said Frank McKenna, chief strategist at Point Predictive. Earlier this year, Point Predictive released a study that identified credit washing and synthetic identities as the primary means of fraud in the auto lending industry.

Further compounding the problem is the rise of credit washing. Credit washing claims hit a five-year high in 2024, with 13% of all U.S. consumer credit report disputes claiming fraud. This represents a substantial increase from 11% in 2023 and nearly double the 7% reported in 2022, creating expanded risks for new account openings.

This tactic enables fraudsters to “recycle” synthetic or stolen identities, giving them a second life and further masking fraudulent activity from detection tools that rely on credit history and behavior tracking tools.

Statistics show that nearly one in every 59 auto loan applications shows signs of manipulation. Federal regulators are also seeing sharp increases in fraud. The Consumer Financial Protection Bureau received 270,000 credit-related complaints in December 2024 alone, up from 70,000 in early 2023 – a 285% increase.