For many people emerging from bankruptcy, the idea of repairing their credit quickly and raising their FICO score through a credit repair agency can be very appealing. But you should stay away from companies that do this by establishing a new identity for you.

What is file segregation?

Here at Auto Credit Express, we're all about getting your credit reestablished by taking out a bad credit auto loan. Although interest rates on these types of loans are higher than regular car loans, time and a good payment history will put you back on track in a couple of years. Unfortunately, there is no shortcut or magic bullet that will help you immediately.

There are, however, companies out there that promise to cure your credit woes almost immediately. For a fee, they will create a new identity for you. For many people who fear they may not be able to get any credit at all with a bankruptcy on their credit report, this kind of program looks to be the answer to all their problems. This answer, however, could land them in prison.

How it works

The credit repair company sends out a letter to people who have recently filed for bankruptcy. The letter states, in a nutshell, that because of their bankruptcy, they will be unable to get a credit car, personal loan or other types of credit for 10 years. To prevent this from happening, the company will, for a fee, hide the bankruptcy by establishing a new credit identity that can be used when applying for credit.

In addition to sending out letters to bankruptcy lists, these companies also advertise in the classified sections of newspapers, on radio, on TV and on the internet. The problem is, if you take the bait and sign up, things quickly go from bad – your bankruptcy – to worse.

But wait, there's more…

Many of these credit repair companies will then suggest that you get an EIN (Employer Identification Number) from the IRS. Although an EIN may look like a social security number, it is an identification number that is designed for businesses to report their financial information to the IRS and the Social Security Administration. Once you receive this number, the repair company will tell you to use it instead of your social security number when you apply for credit.

Why an EIN is a bad idea

In the first place, it is a crime to obtain an EIN for anything other than a legitimate business. If you use a phone or the mail to apply for one, you could also be charged with mail or wire fraud and in many states it is also a civil offense. Enough said.

What you can do to repair your credit

While it's true that a bankruptcy appears on your credit report for 10 years, there are a couple of ways that you can legally begin to repair your credit as soon as the bankruptcy is discharged:

1. Apply for a regular or secured credit card. Unlike a regular credit card, the secured credit card requires that you maintain a savings account with funds to cover the credit limit of your card. While this may not make sense, these companies report to the credit bureaus and you can establish a positive payment history. Once you have this history, you can apply for a regular credit card. Many companies also have a provision that allows a secured card to be converted to a regular card once you've established yourself.
2. Apply for a bad credit car loan. Even if you've had a car repossessed, as long as that repossession was part of the bankruptcy – not before or after – there are many subprime car lenders that will consider you for a loan. There are many online web sites that specialize in directing applicants to dealers that are experts in bad credit financing, helping you avoid the embarrassment of being turned down at a dealership. One such site is

The Bottom Line

Beware of companies that promise shortcuts to credit repair. As part of the Credit Repair Organizations Act, it is illegal for any company to charge you for repairing your credit until they have performed the service. Remember, if it sounds too good to be true, it probably is.

For more information about credit repair and bad credit car loans, visit the Auto Credit Express web site at