Managing credit repair
Credit-challenged customers often ask if we know of any quick credit repair programs. Unfortunately, there are no real shortcuts to credit repair and better credit scores.
Quick and dirty
For consumers exiting a bankruptcy, or even trying to improve their credit, the idea of boosting scores quickly through a credit repair company can sound very appealing.
These organizations will promise to cure your credit woes almost immediately. In the process, they will sometimes create a new identity for you. What they probably won't tell you is that this process is illegal.
Here's how it works:
A credit repair agency sends out letters to people with a recently completed bankruptcy. These letters typically explain that because of the bankruptcy they'll be unable to get a credit card, personal loan or most other types of credit for 10 years, which by the way, is not true.
The credit repair agency will, for a fee, hide a bankruptcy by creating a new identity for you that can be used to apply for new credit accounts. To do this, they direct people to apply for an Employer Identification Number (EIN) from the IRS.
The credit repair company will then direct them to use it instead of their social security number when applying for credit. By doing this it separates any old information from the new credit file they're trying to establish.
What the credit repair agency doesn't reveal is that it's a crime to obtain an EIN for personal identification. Not only that, using a phone or the mail to apply for one means that person could also be charged with mail or wire fraud, and in many states this practice is also considered a civil offense.
The Bottom Line
Beware of any company that promises a shortcut to credit repair. Incidentally, as part of the Credit Repair Organizations Act, it's even illegal for an agency to charge you for credit repair until they've actually performed the service. So remember If it sounds too good to be true, it usually is.
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