Maintaining a good credit score can be a challenge. Most people understand the importance of making timely payments and they work hard to do just that on a consistent basis. Unfortunately, things can happen which are out of your control and make it difficult for you to fulfill all of your financial obligations.
Bankruptcy and Identity Fraud
Things like divorce, death of a spouse, or job loss can cause an already precarious financial situation to spiral out of control. In some cases, recovering from the growing debt can be too much and may mean you have to file for bankruptcy.
Sadly, those who have filed for bankruptcy are vulnerable to con artists who promise to restore your credit rating. Often, they may appear to work for a seemingly legitimate organization. In fact, you may learn of this "credit restoration" through a television, radio, or Internet ad.
File Segregation is Illegal
When you meet with a representative from an agency connected with one of these ads you're told that you can "start over" or get a "fresh start." You're promised that for a fee the agency will hide your bankruptcy and other negative credit information in order to help you renew your good credit score.
Typically, the agency representative will encourage you to file for an EIN, or an employer identification number. You're then instructed to use this new number, not your social security number, when filling out credit card or loan applications. In this way, your negative credit information is hidden. This is referred to as file segregation and it's illegal.
Rebuilding Your Credit Rating
Don't get fooled into believing that all it takes to restore your good credit rating is a "fresh start" with a new number. Using anything other than you social security number is a crime and you can face steep fines - even prison if you misrepresent your social security number on credit card and loan documents. Instead, focus on developing the habits necessary to ensure that you never face the difficulties of bankruptcy again.
There aren't any quick and easy ways to recover from a bankruptcy. It takes time to restore your financial health, rebuild your emergency fund, and re-commit to making consistent payments on outstanding bills. Doing these things, however, will help you develop the habits necessary to restore and maintain a good credit score.