File Segregation — A New Credit Repair Scam

File segregation is a new scheme that scam artists have come up with that promises a new credit identity. They usually target consumers who have filed bankruptcy and tell them they can hide unfavorable information by creating a new credit identity.

Problem is--file segregation is illegal. Fines and prison are possible for those who use this method of obtaining new credit.

Companies who pitch this idea tell people who filed bankruptcy they won't be able to get credit cards or loans for ten years. This is simply NOT true. Unfortunately, many people fall for this wrong information and agree to pay a company to help them set up a new credit identity to use to obtain new credit.

These scam outfits direct people to apply for an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). These EINs resemble social security numbers and are used by businesses.

The scam artists then tell people to use the EIN in place of their social security number when applying for credit. They typically also advise using a new address and credit references.

Unscrupulous credit repair services that pitch this scam tell people lies to convince them they should do this.

They tell people who filed bankruptcy they won't be able to obtain credit for ten years. Even though the bankruptcy may remain on a credit report for ten years, creditors often grant credit shortly after someone files bankruptcy. Each creditor uses different criteria, of course, but it is common to obtain new credit within a year or two after a bankruptcy is discharged.

These scam artists also try to convince people that this scheme is legal. Remember--it is a federal crime to make any false statements on a loan or credit application. It is a federal crime to misrepresent a social security number and also to obtain an EIN from the IRS under false pretenses. Also, mail or wire fraud charges are possible if the mail or telephone are used to apply for credit and provide false information. In addition, this likely would constitute civil fraud under many state laws.

Make sure to steer clear of this scam by avoiding any company that even mentions file segregation and never give false information, use false information or apply for an EIN number for anything other than a valid reason.

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