0: https://help.id.me/hc/en-us/articles/360061369314-How-do-I-t...
Credit reporting agencies and financial service providers should be required to use a government provided identity provider (Login.gov is getting there; it’s currently only offering identity services to federal agencies and select state and local governments) or in person proofing with government IDs to verify identity. If they don’t, they are entirely liable for the transaction(s) and related losses, instead of rolling the dice with security question voodoo and foisting the liability on consumers.
Solve digital identity and you solve identity fraud.
There's absolutely no reason why banks can't do something similar (actually more stringent) when extending a line of credit. The PATRIOT act in the US requires banks to verify the identity of those trying to open an account or secure a mortgage loan, so requiring something similar for lines of credit shouldn't be out of the question.
The root cause of the issue is the law I referenced in the comment[1] that started this subthread. If consumers were able to sue banks and credit bureaus for false information, then banks would have much more incentive to be more diligent. Right now, they can offer "identify theft protection" service where the consumer has to pay them instead. That doesn't give them incentive to be more diligent, and, quite possibly, has the opposite effect.
That's just good vertical integration.
Banks could easily require one to show multiple forms of identification in person at one of their branches in order to apply for credit.
Are you really just handwaving being able to make fake passports or fake government issued identification cards, as if that is basically the same as just knowing someone’s SSN and a couple other pieces of information about them? What a ridiculous argument. ID cards are required to have multiple security features to prevent reproduction without highly specialized equipment, to prevent altering or tampering with existing cards, and to have multiple ways of detecting counterfeiting or altering of cards. There is no “what’s next” because identification cards are already incredibly secure.
The person I was responding to mentioned "multiple forms of identification". At the moment (and I could be wrong) some of these valid forms of identification are things that can be bootstrapped, faked or social-engineered into getting relatively easily. E.g. municipal bills, driver's licenses, birth certificates issued from hospitals, etc. (e.g. look at here for UK https://www.hsbc.co.uk/help/banking-made-easy/help-us-identi... ). Once you get one of those, you can with effort start acquiring more and more of those other ones. And they would all be 100% legitimate and not fake, which is the crux of the "identity theft" problem, as you can't prove who you are even with real documents as the other person has real ones too! I guess I used the term "fake" in my original response a bit loosely.
Point is, we're skirting around the real issue. We have no "chain of proof" or "evidence" from the time you were born to the point in time that you have to start using your identity for formal things. It's all based on layers and layers of multiple people, possibly incorrectly, "vouching" for you by saying you are who you say you are.
Even with secure identification cards, there is still a huge potential for fraud which happens a lot even in countries that have national ID cards. E.g. https://www.timeslive.co.za/news/south-africa/2020-08-28-hom...
Then, when the “real” person asserted the falsehood of your identity, regardless of your real ID cards, it would still be easily provable that you were not the real person. For instance the real person could have their parents verify their identities and certify that the birth certificate you both have a copy of is legitimately tied to the real person and not you. Unlike now, where you can just walk away from some fake accounts and internet information, there is biometric data linking you to multiple serious crimes.
Is it something that could happen, and probably does? Sure. Is it something that would happen even 1% as often as identity theft related financial crimes happen under the current system? Absolutely not. It feels like the current problem is banks being robbed because they are storing their money in a cabinet next to the glass front door, and you are arguing that if banks build vaults and security systems that bank robbers will just bring huge industrial drills with diamond coted bits to break into the vault over multiple hours while bypassing the security system. Sure, they could do that, but bank robberies will still drop to almost nothing compared to before.