Beware of Credit Repair Scams
When you have a poor credit score it can make simple things like renting an apartment difficult. So when you see an advertisement for a way to start over with a new credit history you may think it is the answer you have been searching for, until it isn’t.
I recently came across a new scam on social media, it was an advertisement for people with poor credit to start to rebuild their credit using a CPN. The advertisement promised to get me that new car I wanted using this CPN. It sounded too good to be true, so I did some research.
What is a CPN?
A CPN is a credit privacy number. It is a 9 digit number formatted just like a social security number (SSN). Also called a credit profile number or credit protection number, CPN’s are sold to consumers as a way to hide bad credit history or bankruptcy.
Are CPN’s legal?
The short answer is NO!
Additionally, using a CPN to apply for credit is considered fraud. Even if the company selling the CPN says it is legitimate, these numbers (unlike social security numbers) are not issued by the federal government. Furthermore, the company may direct you to provide false information, such as a different address, when filling out credit applications using the CPN.
Using a CPN, no matter how you acquired it, could be considered identity theft. Additionally, lying on an application for credit or misrepresenting your social security number is a federal crime.
CPN’s will not help with bad credit
Companies that sell CPN’s market them as a legitimate way to replace your social security number, but the CPN’s are often obtained using illegal methods. The two most common ways are 1) stealing social security numbers from children or the elderly and 2) using an algorithm to make fake social security numbers that have not been issued yet. If committing identity theft by stealing a social security number wasn’t bad enough you may still be denied credit if the CPN does not have any credit associated with it.
Rebuild your credit the right way
Bad credit cannot be wiped away with a CPN, but you can rebuild your credit. Here are some tips:
- Pay your bills on time. The single biggest factor in your credit score is on-time payments therefore it’s important to avoid missing due dates. Even if you are only paying the minimum payment.
- Reduce your credit utilization ratio. This is how much of the available credit you are using. To keep your credit score as high as possible, use no more than 30% of your available credit.
- Keep old accounts open. It might seem like a good idea to close an account you paid off. But doing so reduces your total available credit which increases your credit utilization. Also keeping older accounts open shows you have had credit for a long time which helps your credit score.
- Avoid unnecessary debt. Don’t apply for credit unless you absolutely need it. Each time you apply for a loan or a credit card the lender looks at your credit file, called a hard inquiry. Hard inquiries cause your credit score to dip. While this dip is generally only temporary, applying for several loans or credit cards at the same time could imply you are in financial trouble.
- Be patient. Building and repairing credit takes time. Some actions such as reducing your credit utilization reflect quickly on your credit score, others take longer. This is especially true if you have a major negative item such as a bankruptcy. However, using credit responsibly will help reduce the impact of that negative item.