How to Create an Alternate Credit File

- Joseph Sugarman

There have been several different methods developed over the last few decades that have allowed consumers to create a new, clean, second or alternate credit file. Here is the most common.

Using the credit bureau's current criteria in maintaining their records, the first two letters of your last name, your current address and your SSN, consumers are able to create a second credit file using their current SSN. This happens with a name change (by marriage or whatever other reason) and an address change. The consumer then will apply for new credit using the name change and new address, but neglects to use a previous address. When this is done, a second credit file is created by accident.

If a consumer applies for a mortgage in this example and orders a tri=merge credit report, which pulls reports from all three credit bureaus, a second credit file will be created with all three of the credit reporting agencies. The problem here occurs when the consumer knows that they're using a second credit file, and they're attempting to conceal their credit history, they're breaking Federal law.

These methods of using an alternate credit file, in my opinion, is completely illegal and unethical. You will be breaking the law and will find yourself in court explaining yourself to a judge.

But there is a completely legal method to develop an alternate credit file. However, there are two important things a consumer must consider before they decide to use this technique.

First and foremost, creating an alternate credit file does not relinquish a consumer from any previous liabilities that exist on your original file. Second, it is illegal to conceal adverse information that is accurate from a credit reporting agency or to any company that extends credit, such as a bank or credit card company.

EIN's are obtained from the Internal Revenue Service. With the EIN and a new address consumer applies for credit with the new information. When the creditor would run the application it would automatically create a new credit file because the computer would be unable to find the consumer in the database due to the new address and SSN.

Most consumers are unaware that in addition to consumer credit reports, both Experian and Equifax own and operate business credit reporting services. By creating a business credit profile a consumer can now create an alternate credit file legally. While some creditors such as residential utility companies will not allow you to use business credit in place of personal credit, we have had numerous clients who have successfully used business credit to obtain credit cards, automotive leases and loans. This technique (although controversial) can be very effective when done properly.

The basics of building business credit involve:
1.) Setting up the proper structure for your business (i.e. Corporation, LLC, etc.).
2.) Obtaining an EIN as well as a DUNS number (Dunn and Bradstreet).
3.) Borrow and/or buy products and services from vendors who reports to business credit reporting agencies such as Experian, Equifax and Dunn & Bradstreet.

While building business credit requires time just like personal credit, don't get discouraged. Remember, when you set out to begin building your business credit you are starting with a clean slate. This is when it becomes imperative that one learn from the mistakes of their past. Remember, in the credit world those who do not learn from their past are inevitably doomed to repeat it.