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The con was simple.
Companies would target consumers with bad credit and offer to create
a brand new credit file for them by substituting an Employer
Identification Number (EIN) for their Social Security Number (SSN)
along with a new address. EIN’s were obtained from the Internal
Revenue Service on behalf of the consumer. With the EIN and a new
address the companies would either have the consumer apply for
credit with the “new information” or the company would apply for
them. When the creditor would run the application it would
automatically create a new credit file because the computer would be
unable to find the consumer in the database due to the new address
and SSN.
While there is some
dispute among privacy experts as to whether or not this is legal,
the FTC’s actions at the time were not up for debate. Companies were
advertising and luring in consumers in order to have them falsify
credit applications by providing new information such as their
address and SSN in order to obtain credit. This was a direct
violation of the Truth in Lending Act (TILA) and worse yet, the
companies were advertising to consumers that this was 100% legal and
in some cases claiming it was a government sponsored program. As
you’ll hear me say often “In reality, nothing could be further from
the truth”.
Privacy experts will
argue that using an EIN or 9 digit PIN (simply a made up number) in
place of ones’ SSN is completely legal since creditors are on shaky
ground asking for your SSN in the first place. In regards to the
truth in lending act they will argue that one has to exhibit “an
intent to defraud” a creditor. My question “Is concealing ones’
adverse credit history intent in itself?” While I am not an Attorney
on the matter of credit law I can conclude that if a consumer was to
create an alternate credit file using the EIN or PIN method they
better be darn sure they never have a problem paying their bills. If
they do, they most likely would find themselves in a courtroom with
a case involving credit fraud. Which brings me to my next topic.
How To Create An
Alternate
Credit File Legally
Most consumers are
unaware that in addition to consumer credit reports, both Experian
and Equifax own and operate business credit reporting services. By
creating a business credit profile a consumer can now create an
alternate credit file legally. While some creditors such as
residential utility companies will not allow you to use business
credit in place of personal credit, we have had numerous clients who
have successfully used business credit to obtain credit cards,
automotive leases and loans. This technique (although controversial)
can be very effective when done properly.
The basics of
building business credit involve 1.) Setting up the proper structure
for your business (i.e. Corporation, LLC, etc.). 2.) Obtaining an
EIN as well as a DUNS number (Dunn and Bradstreet). 3.) Borrow
and/or buy products and services from vendors who reports to
business credit reporting agencies such as Experian, Equifax and
Dunn & Bradstreet. While building business credit requires time just
like personal credit, don’t get discouraged. Remember, when you set
out to begin building your business credit you are starting with a
clean slate. This is when it becomes imperative that one learn from
the mistakes of their past. Remember, in the credit world those who
do not learn from their past are (inevitably) doomed to repeat it.
Jay Peters is the
founder of Consumer Publishing Group which publishes the Credit
Secrets Bible (in print since 1994). To receive Free Credit Tips
including “How to Bullet-Proof Yourself From Identity Theft For
FREE!” visit their website.
All The Information You Need To Fix or Improve Your Credit is in Our Credit Secrets Bible |
