Credit Repair: Do Not Fall In The Trap Of File Segregation |
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Credit repair can be accomplished by yourself or through a credit repair company. Credit repair companies can assist consumers with contacting credit reporting agencies to remove inaccurate, obsolete, and erroneous items from their credit reports. Unfortunately, there are some unscrupulous credit repair companies that falsely claim they can erase bad credit and help consumers start with a clean slate through file segregation. Have you come across advertisements like these in newspapers and over the Internet? Is your credit less than perfect and do you want to improve your credit rating? If so, you may be the target of a credit repair scheme called file segregation. File segregation turns consumers with past credit problems into lawbreakers. In most instances, credit repair companies promise consumers a chance to hide unfavorable credit information such as bankruptcies, judgments, and late payments, by establishing a new credit history. For a fee, credit repair organizations instruct consumers to apply for an Employer Identification Number (EIN) from the Internal Revenue service. These EINs, which resemble Social Security Numbers, are used by businesses to report financial information to the IRS or Social Security Administration. After receiving an EIN consumers are then advised to apply for credit using the EIN instead of their social security number. Despite what many credit repair organizations tell consumers, file segregation is illegal. It is a crime for any consumer to misrepresent his or her social security number and it is also a crime to obtain an EIN from the IRS under false pretenses. Consumers may find themselves charged with mail or wire fraud if they use the mail or telephone to apply for credit and provide false information. Consumers may also be sued for civil fraud under many state laws. Realizing that consumers may unknowingly take the advice of unscrupulous credit repair organizations to use file segregation as a means to remedy past credit problems, state Attorney Generals have cracked down on credit repair fraud and file segregation. They said that it is a federal crime to make false statements on a credit or loan application. File segregation is illegal. No matter what a credit repair company claims, credit repair cannot remove negative items that legally belong on your credit report. If you become involved with a credit repair company that is using questionable tactics, report them to your local consumer affairs office or your state attorney general. So, before you respond to an advertisement from a credit repair company claiming that it can help you hide bad credit or bankruptcies, keep the following tips in mind: - File segregation is illegal. If you use it (no matter your credit repair company said you to do that), you could face fines or even a prison sentence. - Each creditor has its own criteria for granting credit. While one may reject your application because of a bankruptcy, another may grant you credit shortly after you filed for bankruptcy. Using file segregation to hide a bankruptcy will only create more problems. - Be skeptical of credit repair companies that offer instant solutions to credit problems. The surefire way to improve your credit is to repay your debts in a timely manner. - Beware of credit repair companies that require you to pay money upfront. No credit repair company can do anything for you that you can't do for yourself for free. - Never do business with any credit repair organization without first checking with your State Attorney General office or the Better Business Bureau. - If you feel you have been a victim of a credit repair scam, contact your state Attorney General. The final word is that you should not take the help of a credit repair company as you can face more problems like file segregation and will have to pay penalty for that as well. What credit repair companies can do for you; you can do it on your own. If you find any discrepancies in your credit report, contact the major credit reporting agencies to know how you can correct it yourself. You can also take help from the information on credit history self-help and how to avoid scams, published by FTC. Both the services come free of cost & are very simple to use. If you have accurate negative information in your Credit Report, it is better to attach explanations for non-payment in your Credit File. This may convince the Creditors to issue loans to you in the future. |
