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Trying to restore your damaged credit will often be a very time-consuming and frustrating process, especially if you have been attempting to overcome your credit issues on your own. While you can (and perhaps should) hire a professional credit repair expert to help you legitimately, you may also be tempted to take shortcuts along the way. However, most of these so-called shortcuts are scams and you could even be guilty of fraud and several other potential crimes if you fall for the hype. The New Credit Identity scams are one of these.
The “New Credit Identity” Scams
One such credit scheme which has been around for quite some time is known as the “new credit identity scam“. You might come across this scam online or even via a roadside sign. The advertisements for the new credit identity scam typically read something along the lines of “Create a brand new credit file!”
The scam will be more accurately described as file segregation. File segregation is the process of creating new or secondary consumer credit files to be used in place of your existing credit files. The scam presents itself in a few different forms, but regardless of how the end goal of creating segregated credit files is achieved the mechanics are essentially the same.
- Step One: A con artist claiming to sell “credit repair” services advertises the ability to help you set up a new credit identity for a fee (generally several thousand dollars).
- Step Two: For a fee, the con artist will claim to help you obtain either a Credit Privacy Number (CPN) or an Employer Identification Number (EIN).
- Step Three: You will be advised to use your “new” credit identity number instead of your social security number on loan and/or credit card applications to establish your new credit files with the 3 credit reporting agencies.
Illegal to Use
If you fall for the hype and go through with the process of trying to set up a new credit identity for yourself, you could face some very serious consequences for your actions in the future. First, using any number other than your Social Security number on a credit card or loan application may be considered loan fraud. EINs and CPN numbers are not inherently illegal in and of themselves, but they won’t be used as a substitute for your Social Security number.
If you filled out an application online, via mail, or over the phone with any number other than your Social Security number then you might be found guilty of committing wire fraud or mail fraud as well. Another common complication that occurs with this scam is identity theft. Often the “CPN” or “EIN” numbers that are sold to consumers are legitimate social security numbers which belong to other people. If you purchase and use a number that belongs to someone else you could be guilty of committing new credit identity scam theft, whether you realized you were using someone else’s information or not. Go through our blogs to learn the financial terms and uses.
Illegal to Offer
No legitimate credit repair company will offer to sell “new credit identity” services. It is illegal for a credit repair company to do so. The federal law which regulates credit repair organizations is known as CROA (Credit Repair Organizations Act). CROA specifically prohibits credit repair companies from advising a consumer to “make any statement, the intended effect of which is to alter the consumer’s identification to prevent the display of the consumer’s credit record.” Not only is it illegal for a consumer to use alternative numbers to apply for a loan, but it is also illegal for any company to advise a consumer to do so. Learn more about the CROA!
There is a Better Way
Instead of trying to create a new credit file, there are always better methods of legally working to improve your credit. By establishing solid credit management habits (on-time payments, paying off credit card balances monthly, etc.) and avoiding any new credit mistakes your credit should slowly and organically begin to improve over time.
You will also work with a reputable credit repair company that may be able to work with you to dispute any questionable negative information which is damaging your credit currently. A great way to confirm the credibility of a credit repair company is to see if they are a certified member of the National Association of Credit Services Organizations (NACSO). To schedule, a free consultation with the Credit Pros click here.
Frequently Asked Questions
Can a scammer steal your identity?
Identity thieves can also obtain your personal information by stealing your wallet or purse. When this occurs, it’s better you immediately contact credit card companies, banks, and credit bureaus to let them know of your situation.