A frequent promise made by credit repair companies is the ability to create a "new" credit file for consumers. For an individual who cannot get approved for a loan or who is plagued by high interest rates, a fresh start with credit sounds like the perfect solution. Establishing a credit file under any tax identification number (TIN) other than your Social Security Number has its own set of issues, however, and could potentially do more harm that good.
A TIN is any number used to identify you for tax purposes. Your Social Security Number (SSN) is the number commonly used to apply for credit and maintain your profile. This is one form of TIN. The five other forms of TINs are: Employer Identification Numbers (EIN), Individual Taxpayer Identification Numbers (ITIN), Adoption Taxpayer Identification Numbers (ATIN) and Preparer Tax Identification Numbers (PTIN). Although all six forms of TIN are nine-digit numbers, credit is typically established under the SSN only.
When most people refer to a TIN, what they are actually referring to is the EIN. Employer Identification Numbers are available to anyone with a small business or sole proprietorship and a valid SSN. The EIN serves to keep business credit purchases separate from personal credit purchases. Because of this, all small business owners must use the EIN to establish credit. Credit cannot be established using a PTIN or ATIN. These numbers are issued only to licensed tax preparers or those in the process of adopting a child from a foreign country.
Establishing credit using an EIN is a perfectly legal practice for business owners. It is not, however, legal for individuals to create personal credit profiles using an EIN. Doing so is known as "file segregation." File segregation occurs any time a consumer creates an alternate credit file for himself under a number other than his SSN. The Federal Trade Commission (FTC) strongly discourages consumers from participating in this practice. It also requests that consumers report any credit repair organization that encourages consumers to segregate their credit files.
If your credit report is damaged, it can take years of on-time payments and careful credit monitoring to fix your score. During this period of time you may not qualify for loans or credit. The idea of a fresh new credit report is alluring enough for many people to begin applying for credit with either an alternate TIN or a random nine-digit number. When you do this, you are deliberately hiding your credit report from lenders. Forcing a lender to pull a false credit report on you by providing a number other than your SSN on an application constitutes fraud and is illegal.
A Social Security Number and an Employer Identification Number may both be TINs, but the effects of using them to establish a credit profile are very different. Using your SSN to apply for credit is legal and encouraged. Using any other TIN to establish credit can result in charges of perjury being levied against you by the IRS for a fraudulent TIN application, charges from any creditors who have been victims of the fraud, and the merging of your credit files by the credit bureaus. Perjury and fraud both carry fees and potential prison time.
- "File Segregation": New ID Is a Bad Idea
- Fair Isaac Corporation. "What's In My Credit Scores?" Accessed Oct. 31, 2020.
- TransUnion. "What's Considered a Good Credit Score?" Accessed Oct. 31, 2020.
- Consumer Financial Protection Bureau. "Is it Possible to Remove Accurate, Negative Information From My Credit Report?" Accessed Oct. 31, 2020.
- Federal Trade Commission. "Fair Credit Reporting Act § 605. Requirements Relating to Information Contained in Consumer Reports." Page 22. Accessed Oct. 31, 2020.
- TransUnion. "How Long Do Closed Accounts Stay on My Credit Report?" Accessed Oct. 31, 2020.
- Consumer Financial Protection Bureau. "How Can I Tell a Credit Repair Scam From a Reputable Credit Counselor?" Accessed Oct. 31, 2020.
Ciele Edwards holds a Bachelor of Arts in English and has been a consumer advocate and credit specialist for more than 10 years. She currently works in the real-estate industry as a consumer credit and debt specialist. Edwards has experience working with collections, liens, judgments, bankruptcies, loans and credit law.