According to a study carried out by Garlik, 33 per cent of those surveyed are unaware that the file is used by credit lenders when judging whether to grant a personal loan to consumers and the amount of interest that they will be charged. Meanwhile, about one in five respondents did not even know that such a report is ever held in their name.
The findings also indicated that only a quarter of consumers have checked their credit history over the last five years, with about half of these said to have done so once during this period. Young adults were said to be the most under-informed about credit reports, with almost half (48 per cent) said to be ignorant on why the file is used.
Chief executive for the data protection company Tom Ilube said: "Credit reports have historically been used by financial organisations before offering individuals credit. However, online identity fraud is rapidly increasing, with the average person's ID worth an estimated 85,000 pounds to fraudsters, so it is becoming increasingly necessary for people to take matters into their own hands and ensure they remain on top of their credit files".
A Garlik case study revealed that a young mother had developed debts of some 9,000 pounds after her identity was stolen as the thieves borrowed money on plastic cards, car finance deals and other forms of credit in her name and attempted to take out a mortgage. Consequently, she is now reported to be unable to get a car on credit. "Katie, like all of us, can best prevent identity theft by proactively and regularly monitoring her credit report", Mr Ilube added.
Meanwhile, Melanie Mitchley, director of industry relations for Callcredit, claimed in January that those whose credit history has been the victim of identify theft can find their financial pressures intensifying. "It can take many hours work over several weeks, even months, for someone to recover control of their identity and sort out their credit file", she claimed.
Earlier this year, figures released by Which? revealed that those who regularly check their financially history with all three credit reference agencies - Equifax, Call Credit and Experian - are more likely to get a cheap loan. The consumer watchdog reported that as loan providers use different information when making decisions on whether to approve borrowing consumers could secure a more competitive rate of interest by getting a copy of their file from each reference group.
Meanwhile, about a fifth of Which? consumers who have recently had their credit file checked out were said to have found a mistake with their report. Figures from the company also revealed that seven out of ten respondents have never verified their files with a credit reference agency.
As a result, editor for Which? Money Martyn Hocking claimed that for the cost of 6 pounds checking credit files could be "money well spent" for consumers looking for a low-rate loan.
Well... you're right. It is too good to be true but these types of ads are now surfacing again after the Federal Trade Commission launched "Operation New ID Bad Idea" over 8 years ago. This operation targeted (and took down) over 50 credit repair organizations and companies selling consumers both pamphlets and services giving them a brand new credit file under the pretense it was 100% legal and in some cases even claimed it to be a "government sponsored" program!
The con was simple. Companies would target consumers with bad credit and offer to create a brand new credit file for them by substituting an Employer Identification Number (EIN) for their Social Security Number (SSN) along with a new address. EIN's were obtained from the Internal Revenue Service on behalf of the consumer. With the EIN and a new address the companies would either have the consumer apply for credit with the "new information" or the company would apply for them. When the creditor would run the application it would automatically create a new credit file because the computer would be unable to find the consumer in the database due to the new address and SSN.
While there is some dispute among privacy experts as to whether or not this is legal, the FTC's actions at the time were not up for debate. Companies were advertising and luring in consumers in order to have them falsify credit applications by providing new information such as their address and SSN in order to obtain credit. This was a direct violation of the Truth in Lending Act (TILA) and worse yet, the companies were advertising to consumers that this was 100% legal and in some cases claiming it was a government sponsored program. As you'll hear me say often "In reality, nothing could be further from the truth".
Privacy experts will argue that using an EIN or 9 digit PIN (simply a made up number) in place of ones' SSN is completely legal since creditors are on shaky ground asking for your SSN in the first place. In regards to the truth in lending act they will argue that one has to exhibit "an intent to defraud" a creditor. My question "Is concealing ones' adverse credit history intent in itself?" While I am not an Attorney on the matter of credit law I can conclude that if a consumer was to create an alternate credit file using the EIN or PIN method they better be darn sure they never have a problem paying their bills. If they do, they most likely would find themselves in a courtroom with a case involving credit fraud. Which brings me to my next topic.
How To Create An Alternate Credit File Legally
Most consumers are unaware that in addition to consumer credit reports, both Experian and Equifax own and operate business credit reporting services. By creating a business credit profile a consumer can now create an alternate credit file legally. While some creditors such as residential utility companies will not allow you to use business credit in place of personal credit, we have had numerous clients who have successfully used business credit to obtain credit cards, automotive leases and loans. This technique (although controversial) can be very effective when done properly.
The basics of building business credit involve 1.) Setting up the proper structure for your business (i.e. Corporation, LLC, etc.). 2.) Obtaining an EIN as well as a DUNS number (Dunn and Bradstreet). 3.) Borrow and/or buy products and services from vendors who reports to business credit reporting agencies such as Experian, Equifax and Dunn & Bradstreet. While building business credit requires time just like personal credit, don't get discouraged. Remember, when you set out to begin building your business credit you are starting with a clean slate. This is when it becomes imperative that one learn from the mistakes of their past. Remember, in the credit world those who do not learn from their past are (inevitably) doomed to repeat it.
Both Abbi Rouse & Jay Peters are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Abbi Rouse has sinced written about articles on various topics from Personal Finance, Careers and Job Hunting and Diabetes Treatment. Abbi Rouse writes for Essentially . Our visitors can apply for. Abbi Rouse's top article generates over 49500 views. to your Favourites.
Jay Peters has sinced written about articles on various topics from Bad Credit Loans, Free Credit Report Score and Credit Counseling. Jay Peters is the founder of Consumer Education Group which publishes the Credit Secrets Bible (in print since 1994). To receive Free Credit Tips including