Credit repair organizations have promoted the use of the EIN (Employer Identification Number) to create new credit profiles for consumers with bad credit since the 1990’s. This practice is dangerous for both the consumer and the credit repair company facilitating it.
How New Credit Files Work
When an individual applies for a loan or line of credit, the lender will perform a credit check on the Social Security Number (SSN) provided. All credit accounts linked to that number will form a credit report which the lender may then review in order to make an educated decision about whether or not the consumer in question should be extended the loan or credit line.
If a consumer provides the lender with an EIN rather than a SSN, this leaves the lender unable to pull a credit report on the consumer. Should the lender decide to offer the individual the loan, the account will then be reported to the credit bureaus under the EIN rather than the individual’s legitimate SSN. This creates a new credit report that can be viewed by any other company that pulls the consumer’s credit in the future. The individual is then participating in file segregation by having two separate credit profiles.
