| Click on our Advertisement |
|
|
In cases of filing for bankruptcy, you may become vulnerable to a credit repair strategy known as file segregation?, whereby you are promised an opportunity to conceal adverse credit information by creating a new credit identity.
The fact is that the strategy of ?File segregation? is illegal. If you resort to it, you could be fined or even imprisoned.
The Pitch: A New Credit Identity
After filing for bankruptcy, the credit repair company may warn you through a letter that your bankruptcy could diminish or completely destroy your chances of obtaining credit cards, personal loans, or any other kind of credit for 10 years. At the same time, the company will promise to assist you in concealing your bankruptcy and building a new credit identity to enable you to secure credit. It?s a paid service. You may come across their advertisements in classified ads, on radio and TV as well as on the Internet.
Usually, the EINs (just like Social Security numbers) are utilized by businesses to provide financial information to the IRS and the Social Security Administration. When you get your EIN, the credit repair service will ask you to utilize it instead of your Social Security number at the time of applying for loan.
The Catch: False Claims
The credit repair service will make various wrong claims to persuade you to build a new credit identity. In this respect, you should remember that these wrong claims, including the advice to create a new credit identity, may trap you and implicate you in a case of fraud. Some of the oft-repeated claims are:
Claim 1: You will be disqualified for credit for 10 years, the period till bankruptcy remains on your credit report. This is only a general rule, but there are exceptions. Some creditors may provide you credit, although at higher interest rates, just after you declare bankruptcy. Moreover, with a more punctual and prompt payment record, perhaps, your chances of obtaining new credit will increase as time passes.
Claim 2: The credit repair company or ?file segregation? program is genuine since it is affiliated with the federal government. The fact is that the federal government neither supports such programs nor does it have any association with such companies.
Claim 3: The ?file segregation? program is legal.
On the contrary, the following procedures involved in ?file segregation? program are all illegal.
- Providing any wrong declarations on a loan or credit application.
- Misrepresenting your Social Security number.
- Obtaining an EIN from the IRS under false pretenses.
- Using the mail or the telephone to apply for credit and give wrong information.
- File segregation is considered civil fraud under several state laws.
Conclusion
Several states have implemented laws to regulate the affairs of credit repair companies. These are very helpful in the event of losing a huge sum of money to credit repair scams. In case of any problem with your credit repair company, you can report the matter to the federal court. For more information, you can approach your local consumer affairs office or your state attorney general (AG). The AGs also have toll-free consumer hotlines.
|
