Credit Topic:File Segregation

What is file segregation?

[fahyl seg-ri-gey-shuhn] n. fraudulent practice of creating a new consumer credit file typically performed by applying for an Employer Identification Number that is then used in place of a Social Security number on credit applications.

For some consumers, the idea of starting again with a brand new credit file is very compelling. When faced with the prospect of trying to rebuild their credit after filing for bankruptcy, experiencing a foreclosure, or dealing with some other credit catastrophe, creating a completely new credit identity seems like an ideal solution.

Many fraudulent "credit repair" clinics have offered to help desperate consumers create a new credit file, a process known as file segregation. In exchange for upwards of a few thousand dollars, these companies promise a cure for bad credit.

File segregation is illegal and what many consumer do not realize when they fall for this credit repair scam is that they can get in trouble with the law as well as the clinic they are working with. When using the "new" credit identity on a credit application, consumers could end up being charged with a number of crimes including federal wire fraud and civil fraud under many state laws.

File segregation is not the answer

People who attempt to create a new credit file using file segregation schemes always have a better option. It is simply not worth the risk to participate in a file segregation scheme, let alone trust a credit repair clinic that purports to repair your credit using illegal tactics with you hard earned money.

Bad credit will resolve itself over time if you are diligent about properly managing your credit on an ongoing basis. Even following a bankruptcy, many consumers are able to get approved for loans and other credit accounts within a couple of years that help in rebuilding their credit.

Of course, if your credit reports contain questionable negative listings that are causing a low credit score, you may be able to improve your score much more effectively by disputing and removing these questionable credit listings. Lexington Law has helped thousands of clients legally dispute the questionable negative items from their credit reports and last year alone helped remove over 2,500,000 negative items including bankruptcies, repossessions, judgments, and foreclosures.

Last year, our clients saw
over 4,800,000** negative
items removed from their
combined credit reports.
How we count removals
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