Resources to build and protect your credit

Building credit without a Social Security number

Can I build credit without a Social Security Number (SSN)? Yes! Creditors may lend to people who do not have social security numbers. A SSN is only one of the unique identifiers necessary to match credit account information to an individual’s credit file. Having a SSN, however, may increase the accuracy of the credit bureaus’ matching process, but it is not always essential.

Should my Individual Taxpayer Identification Number (ITIN) be used in the place of a SSN to help build credit? No, but it could be. In general, ITINs do not prove identity outside of the tax system and therefore should not be used for credit reporting. However, there are exception as there is no law prohibiting a creditor from using an ID number that is not a SSN to report borrower data.

Can I build credit with my new valid SSN by associating it with past credit? Yes! A valid SSN should automatically become associated with a consumer’s credit file once any current or new creditor or business begins reporting that SSN as part of that consumer’s credit payment history. Additionally, it may be helpful for individuals to proactively work with the credit bureaus to associate their existing credit history with their new SSN.

Addressing the impacts of identity theft

Identity theft can occur through unauthorized use or attempted use of an existing account, such as if your personal credit card was stolen and used by the thief to make a purchase.

It can also occur when personally identifiable information is used without permission to open a new account or service.

Finally, identity theft is also the misuse of PII for fraudulent purposes. For example, if someone uses someone else’s social security number to file taxes, or if someone provides another person’s name and driver’s license during a traffic stop.

Step 1: Fraud alert

A fraud alert is a notice that a consumer can request to appear on their personal credit report.  This notice is designed to alert a creditor that the consumer’s whose credit report is being reviewed may be at risk for identity theft or fraud.  The notice should prompt the business to take extra steps to verify the identity of an applicant before issuing credit.

A consumer only needs to contact one of the three major credit reporting agencies to place a fraud alert.  The CRA that is contacted will notify the other two companies to also place a fraud alert on the consumer’s credit file.

Step 2: Reporting identity theft

The Federal Trade Commission (FTC) has created a one-stop dedicated website (available in English and Spanish) IdentityTheft.gov through which you can submit a complaint and generate an official Identity Theft Report. You will also receive:

• Personal recovery plan: A checklist of action items for the consumer to do in order to resolve any issues resulting from the identity theft and to protect themselves from future harm. This service is available in English and Spanish.
• Pre-filled letters: You will be provided with pre-filled letters complete with all of the necessary details needed to inform businesses and others of the identity theft.
• Identity theft report: This is your official statement about the crime. In addition, you can also access an Identity Theft Affidavit, an IRS form which may be needed for tax purposes.

Step 3: File a police report

Whereas previously an identity theft report required a police report to be filed, according to the FTC, this is not longer the case. Nevertheless, filing an identity theft report with the FTC still legally obligates you to tell the truth. The crime gets reported to the Federal Trade Commission, or the FTC, a federal law enforcement agency. Filing ID theft to get derogatory information removed from a report is considered a crime. If a complaint is filed with false information, the individual can be subject to criminal penalties.

There may be certain situations when a police report should still be filed. For example:

• You know the identity thief, or have other information that could help a police investigation
• An identity thief used your name in a traffic stop or any encounter with police, or
• A creditor, debt collector, or someone else affected by the identity theft insists that you produce a police report.
• Again, if any of the above vaguely apply, it’s better to file the police report in addition to the identity theft report, covering all bases.

Step 4: Credit freeze

Placing a credit freeze is probably the most effective way of preventing an identity thief from opening up new credit accounts in your name. That said, credit freezes are really intended for use when there is a real threat of identity theft, theft of personal information has already occurred, or potentially in cases in which a consumer will be unable to keep up with monitoring their credit report for an extended period of time, for example because of extended travel or incarceration.

In light of recent data breaches, some experts do recommend that consumers place a credit freeze on their credit file as a preventative measure if their personal information has been exposed.

Some consumers may prefer not to place a credit freeze, especially if they plan on seeking credit in the near future.

Additional steps for identity protection

• Check the credit report regularly (at least 3 times per year through www.annualcreditreport.com)
• Review all financial/bank statements closely
• Practice security with electronic and physical information
• Opt out of pre-screened offers for credit and insurance www.optoutprescreen.com
• Do not share personal information with others
• Watch out for scams https://www.consumer.ftc.gov/features/scam-alerts
• File taxes as early as possible

Avoid fee-based services

Consumers who are looking to protect their identity will find no shortage of companies who are interested in selling services to do so.  This include credit monitoring, a service which provides alerts when there are changes to the credit report or personal information is used to attempt to open account.  Credit lock services are marketed as a more convenient version of the credit freeze, and recovery services provides protection coverage in the case that a consumer’s identity is stolen resulting in a financial loss.

These services are worth noting because they are so prevalent in the marketplace, and while they might offer people an extra layer of security and convenience, many of the features that theses services offer are things that consumers can do on their own, for free.

Resolving credit errors through a dispute

Disputing inaccurate information that you find on your credit report is a great first step towards building strong credit. Understanding how to dispute is also an important skill to sustain healthy credit over the long-term. Work with a coach and make sure that you are only disputing items that are actually incorrect. Trying to dispute valid debts in order to improve credit scores is considered fraudulent practice in the credit industry.

Myths vs. facts

• Myth: If you dispute a negative item on your report it will disappear temporarily and you can get your application approved before it reappears.
  • Fact: Accounts that are currently in dispute may temporarily not impact a credit score, but it will still show up on the report. This is not an appropriate strategy for trying to seek loan approval.
• Myth: You need to dispute each mistake with each bureau.
  • Fact: If an account that is disputed is listed on reports from multiple bureaus, the bureau that you dispute with will inform the others to remove the account.
• Myth: You can’t dispute everything on one credit report with just one letter.
  • Fact: You can list everything that you would like to dispute on a credit report in one single letter. For best results also include a copy of the report with your dispute letter, circling everything that is inaccurate.
• Myth: You can require documentation from the bureaus for anything on your report you don’t recognize.
  • Fact: The credit bureaus cannot provide you with documentation about the validity of any of your information. If you are seeking proof that you owe a debt, you will need to request a debt validation directly from the creditor that is listed on the report. If that creditor is unable to validate your debt, you can dispute it with the bureaus.

Watch out for fraudulent advice/strategies

• Fraud: Paying off collections and asking creditor to remove the account – or paying extra fee to have a collection agency remove an account (Violates FCRA accuracy requirement).
• Fraud: Dispute anything negative on your report and most will probably fall off, even if they are accurate.
• Fraud: Create a new credit identity with an Employer Identification Number (EIN) instead of your SSN for a fresh start.
• Fraud: Buy an “Authorized User” position on a stranger’s credit card who has a good repayment record to boost your own score.

Negotiating with creditors

Paying off debt and collections, while often necessary and important, is not a credit building strategy in and of itself. However, paying collections can be essential to financial stability and peace of mind. Despite the potential negative effects of paying collection accounts, negotiating settlements can be done with credit building goals in mind.

What to avoid

Avoid establishing a payment plan with a collection agency. If a client negotiates a payment plan and then misses a payment, the collections agency can accuse the consumer of being in default of the deal and change the negotiated financing agreement – often increasing the total amount due.

When establishing a payment plan is the only option… In certain instances, such as when a civil judgement is present, a payment plan may be the best option to avoid wage garnishment. In these cases:

• Try to establish a payment plan with the original creditor and not the collection agency.
• Negotiate the total amount before negotiating the monthly payments.
• Get an agreement in writing before making the first payment, and request a receipt for each payment made according to the agreement.
• Make all payments on time.

Don’t let a collection agency know how important or urgent it is to improve credit. Try to avoid providing information such as:

• “I am working on improving my credit.”
• “I am in the process of buying a house.”

Don’t let Collection Agencies know if funds are available to pay the full amount. Try to avoid providing information such as:

• “I came into a substantial amount of money.”
• “I just received an EITC tax refund.”

Avoid getting into a debate or argument with the Collection Agent. For example, don’t say:

• “I don’t agree with the balance…the original debt was only…”

Has an intimate partner ever convinced or pressured you to borrow money or buy something on credit when you didn’t want to and threaten consequences for saying “no”?  There are many steps you can take to rebuild your credit and protect it.