Consumers with bad credit often look for a quick fix, which can be a mistake. In terms of repairing car credit, bad credit auto financing is a much wiser choice than file segregation, though results may take longer to be realized. There are no shortcuts when it comes to credit repair.
Attempting to quicken the process can end up hurting the car buyer.
A credit repair agency often seems attractive to someone interested in increasing the credit score. Whether the person is emerging from bankruptcy or just trying to take the score to a respectable level, this agency claims to quickly repair credit.
For a fee, some agencies will grant the individual a new identity, which can lead to many problems.
In a process called file segregation, the agency offers to hide the bankruptcy. Once the agency is paid the fee, it directs the consumer to apply for an Employer Identification Number with the IRS. This number looks like a Social Security number but is really a business identification number.
The agency tells the consumer to use the EIN rather than the Social Security number on credit applications. This segregates the existing credit history and enables a new credit file to be created. What the credit repair agency does not reveal is that obtaining an EIN for personal identification purposes is a crime.
If the EIN is applied for using the telephone or mail, the consumer may also be charged with wire or mail fraud.
Any arrangement that seems to repair credit too easily is usually not totally legitimate. Organizations promising fast credit repair should be approached with caution. When purchasing a car, it is much better to use bad credit auto financing than engage in file segregation.
Positive results may not come as quickly but at least the consumer will not be facing jail time.
