Dealing with credit problems can be extremely frustrating…stipulated! You’re constantly being denied mortgages, credit cards, and auto loans. And if you do happen to be approved then you’re likely going to be required to pay higher interest rates for your financing. Bad credit is expensive and it’s embarrassing.
If you are currently working to overcome your own credit issues then bravo! Working hard to educate yourself and to improve your credit is admirable and, when done correctly, can pay huge dividends in the future.
However, the fact of the matter is that your credit history cannot be improved overnight.
Rebuilding damaged credit takes time, potentially years depending on the severity of the damage. Because improving your credit can be such a drawn out and tedious process many consumers are tempted to look for shortcuts to help speed up the process. Unfortunately, some of these so-called “shortcuts” are actually scams that could get you into a lot of trouble. Here are 3 of the more egregious credit scams that you should avoid like the plague.
1. Tradeline Renting or “Piggybacking”
“Piggybacking” on another person’s credit card account can certainly be a very effective way to improve your credit scores, and is perfectly legal and ethical under the right circumstances. When you are added as an authorized user to a well-aged credit card account that has a high limit and a clean payment history you could potentially be improving your credit scores a great deal overnight. And there is nothing wrong or illegal about asking a loved one to add you as an authorized user to his/her credit card account.
Piggybacking only becomes a problem when you pay to be added to a stranger’s credit card account for the purpose of gaming the credit scoring system. This practice, known as tradeline renting, is not as common as it was in previous years. However, there is still an array of shady websites that will connect you (for a fee) with consumers willing to add strangers as authorized users to their credit card accounts.
The problem with tradeline renting from strangers is that if you partake in the practice you could arguably be guilty of committing bank fraud because you are knowingly misrepresenting your credit history. Additionally, you could also potentially be guilty of mail fraud if you used the U.S. postal service to facilitate the tradeline renting or wire fraud if you used the telephone or email.
2. CPN and EIN Numbers
Another common credit scam involves efforts to create and use a new credit file, essentially making your damaged credit reports irrelevant. This particular scam can be especially dangerous to you and it comes in 2 flavors – the CPN number and the EIN number. A credit privacy number (CPN) is generally marketed as a 9-digit identification number that can be used in place of a social security number when applying for credit. An employer identification number (EIN) is how businesses identify themselves to the IRS. The fraudsters who run these scams will try to convince you that they can sell you a CPN or an EIN which you can use to create a new, clean credit file for yourself with all 3 credit bureaus.
CPN and EIN numbers in and of themselves are not inherently illegal. However, if you try to later use the CPN or EIN number in lieu of your social security number on a credit application then you arguably have committed bank fraud (potentially mail and wire fraud as well). When you fill out an application for credit it asks you for your social security number and if you knowingly use a 9-digit number that is NOT your social security number then it’s hard to argue that you’re not committing bank fraud.
Additionally, if your newly purchased “credit identity” turns out to be a recycled social security number (as is often the case with these scams) then you could also be guilty of committing identity theft. If you do not want to risk spending time in an orange jumpsuit then you should absolutely avoid working with anyone who offers to create a new credit report or credit file for you, period.
3. Falsely Claiming Identity Theft
Thanks to provisions within the Fair Credit Reporting Act if you properly report identity theft to the credit bureaus then within 4 days all of the fraudulent accounts must be removed from your credit reports.
This is great news for anyone who has truly been a victim of identity theft. Because of the speed with which the credit bureaus must erase fraudulent accounts from your credit reports scam artists have, unsurprisingly, come up with a way to once again game the system. You can find scam artists who will help you to file a falsified identity theft report (potentially even a falsified police report) who will then submit said report to the credit bureaus in an effort to have your credit reports swept clean of negative information.
Unfortunately for you, if you participate in this scam and cry wolf when you are not actually a victim of identity theft then you could be setting yourself up for disaster. Falsifying a police report or identity theft report is a crime. And you are likely committing mail fraud if you use the U.S. mail system to submit that report to the credit bureaus.
In fact, I’ve been an expert witness in cases where a consumer has falsely cried “identity theft”, was successful getting a large number of derogatory entries off of her credit report, went out and got a loan, and then promptly defaulted on it. Once the bank realized what had happened they contacted the authorities. Long story short, the fraudster is now in prison and will be there for the next 4 years.