A new scam in town helps those without good credit present a better credit score to lenders. The scheme has drawn the attention of the federal prosecutor’s office in Kansas City.
To obtain some loans, the credit score is everything. Some who have a low score have been able to obtain loans anyway by renting, buying or just ripping off another person’s good credit score.
Gene Porter, Chief of Fraud and Corruption Unit in the US Attorney’s office in Kansas City, says often the person with a poor credit score simply buys a good credit score from someone else.
“We’re seeing it just absolutely multiply,” Porter says. “Where people are buying somebody else’s credit score in order to qualify for a loan, getting the loan, taking it out and, boom, it’s not being paid, it’s going into default.”
In an already shaky credit market, lending institutions can’t take many such hits. Authorities so far have identified at least $11 million in fraudulently obtained mortgages in the western half of the state with losses totaling $5 million.
Porter understands it doesn’t make much sense to sell a good credit rating to someone who might abuse it.
“Obviously, if they are letting that happen willingly, they’re running a great risk of their own credit scores being destroyed in the process, understand that’s part of it. But it’s going on,” according to Porter.
Federal authorities in Kansas City spotted a couple of instances of credit history fraud a few years ago, but they say it has been cropping up more and more since the financial market collapse and the recession it triggered.