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| New Credit Identities: A Really Bad Idea |
Across the web, newspapers and even TV ads, you will eventually come across a site with headlines
similar to the following:
- Wipe out bankruptcies and judgements forever
- Start fresh with a new credit identity
- Bad credit erased - 100% guaranteed
What these websites are promoting is the latest method in credit repair fraud: Credit File Segregation.
Their main target audience is those of you who have had to file for bankruptcy. Basically, you are falsely
promised that a brand new credit file will be created for you and your bankruptcy will be hidden, never to
affect you again. This program sounds too good to be true. It is. Credit file segregation is ILLEGAL.
If you participate in this scheme, you could face criminal charges, or even a prison sentence.
THE TECHNIQUE:
After you sign up for this so called program and pay some ridiculous fee, you will be directed to apply
for an Employee Identification Number (which is similar to a Social Security Number). You then apply
for credit using this number in place of your SSN. A new mailing address and some bogus credit
references will also be suggested. Most individuals will recognize that this does not sound totally
legitimate. However, the repair agency will be persistent and will use the following tactics to convince
you otherwise:
You will not get credit for 10 years:
Different credit grantors have different policies. One may decline you while another may grant you
credit. There are other methods to re-establish your credit. (See Bankruptcy: Survive After You File)
The file segregation program is affiliated with the federal government:
The government does not support or acknowledge this program. The IRS advises consumers that involvement
in credit file segregation constitutes fraud.
The file segregation program is legal:
It is a federal offense to:
- Make false statements on a loan application
- Misrepresent your SSN
- Obtain an EIN from the IRS under false pretenses
- Apply for credit via mail or the telephone using false information
YOUR RIGHTS:
The agencies, which operate these credit repair schemes, are subject to laws that are in place to
protect you, the consumer. These credit repair agencies are required to advise you in writing regarding
your legal rights and provide a written contract which clearly outlines:
- The services to be performed
- How long it will take to achieve the results specified
- The total cost
- Any guarantees made regarding the results
- The consumer has 3 days to cancel the contract
THE PITFALLS:
If you are considering using this technique, please remember one thing. Your old credit file
still exists and is still out there. There will always be the danger that your old file will
surface because your SSN number has not changed. Getting involved in this scheme will simply
keep you up at night and have you constantly looking over your shoulder. If you have filed for
bankruptcy and are looking to re-establish your credit, check out the resources at the end of
this page.
ON THE WEB:
Since you are reading this, you obviously have access to the Internet. We urge you to watch
out for websites that sell credit repair techniques. Especially those sites that sell these
so-called credit repair techniques. As we have outlined, these techniques are illegal and in
the end are not worth the enormous risk for miniscule gain. If you buy one of these programs,
you are simply wasting your money. If you really want to re-establish and fix your credit,
you can do it yourself or get help from a reputable agency.
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