Have you ever struggled with credit problems? If so, chances are you’ve probably wished, at least once, for a solution to erase all your credit troubles. After all, bad credit can cause your life to be quite stressful and more expensive. It can lead to the denial of loan applications, difficulty finding an affordable place to live for your family, and can even cause you to be passed over for a job.
Given the many issues that accompany poor credit, it’s no surprise that some people may search for a quick fix to their credit problems. And there’s no shortage of scam artists offering quick and often expensive fixes to the people who find themselves in this situation.
However, before you go chasing a quick fix to your credit problems, you should realize that your “quick and easy” solution could potentially backfire in some very unpleasant ways. So unless you want to risk sporting an orange jumpsuit, you should avoid these common credit repair scams.
EIN and CPN Scams
Perhaps the most common credit scam, and certainly one of the most dangerous, involves creating a “new” credit identity for yourself so you can leave your old, lousy, identity in the past. Shady companies lure desperate consumers into this particular scam with promises of wiping out bad credit immediately, thereby creating a clean slate or blank credit reports, which can allow consumers with credit problems to simply start over from scratch.
This scam comes in a few different flavors, but it will almost always involve you paying some company to “assign” a new EIN (Tax ID Number) or CPN (Credit Privacy Number) for you to begin using in lieu of your legitimate Social Security number on future financing applications.
While EINs and CPNs are not inherently illegal in and of themselves, it is certainly illegal to lie and use them in place of your Social Security number on a loan or credit card application. Additionally, many of the scam artists who sell these numbers actually sell stolen Social Security numbers, which could mean you’re not just committing loan fraud, but identity theft as well. When you’re filling out a credit application and you notice it asks for your Social Security number — they’re not kidding.
Identity theft can be a horrible experience. Thankfully if you ever find yourself in a situation where fraudulent accounts have been opened in your name, the Fair Credit Reporting Act (FCRA) requires that these accounts be erased from your credit reports quickly. In fact, as long as you report the fraud properly, the accounts must be removed from your credit reports within four business days.
You can probably already see where this scam is headed. One of the strategies some unethical credit repair companies employ is to convince you to cry wolf and claim to be a victim of identity theft in order to wipe your credit reports clean of derogatory but legitimate accounts. These companies may even assist you in filing falsified police reports or identity theft reports in order to corroborate your ruse. Unfortunately for you, if you go along with such deceit, you will likely be breaking multiple laws and could be risking significant fines or even jail time in the future.
I was an expert witness in a lawsuit where a defendant was able to get a large amount of “fraudulent” (not really) accounts and inquiries removed from his credit reports using this particular strategy. Yada yada yada, he’ll be out of jail in about four years.
A totally legitimate strategy that can help you to rebuild damaged credit is to ask a friend or family member to add you as an authorized user to an existing credit card account.
Being added as an authorized user could potentially give your credit scores a boost by helping to increase the average age of your accounts, possibly lowering your revolving credit utilization ratio, and adding a generally good account to an otherwise bad credit report.
Yet some consumers either do not have a loved one who’s willing or able to help them in this manner, or they’re too embarrassed to ask. Enter the “trade line renting” scam.
There are actually companies that act as brokers between credit-challenged consumers and those with well managed, well aged credit card accounts. Essentially, for a hefty fee, a consumer with credit problems can pay to be added as an authorized user to a stranger’s good credit card account. You shell out big bucks, the broker keeps his or her hefty share, and the actual cardholder gets a little bit of the action too.
Participating in such an overtly dishonest means of manipulating your credit could find you on the wrong side of a bank fraud (or even mail fraud) lawsuit with the U.S Government as the plaintiff. Good luck fighting that one.
The long and short of it is this: There are a lot of ways to repair bad credit. Scamming your way there isn’t necessary. Don’t take the risk.