Ask the Dollar Diva By Dorothy Rosen • Bankrate.com

The truth about credit repair scams

Dear Dollar Diva,
Does anyone know anything about a company that says it can give a person a new, clean credit report under a new tax ID number, as opposed to the person's Social Security number? It claims there is a legal way to start out completely clean and no one would know about a previous bankruptcy when applying for other loans in the future. Sounds too good to be true. Any information would be appreciated.

The Diva knows all about it -- it's called fraud. When something sounds too good to be true, it usually is.

There are unscrupulous credit repair companies that make claims that are untrue, some of which are also illegal. Let's go through your question one point at a time:

1. No one can give someone a new, clean credit report. If there are mistakes on your credit report, the mistakes can be corrected. If there is a bankruptcy on your credit report, only time will take it off.

2. There are two forms of federal identification numbers:

• Social security number -- for individuals

• Federal Employer Identification Number -- for all other entities, i.e. corporations, partnerships, trusts.

  You can only have one Social Security number as an individual. It is illegal to use a different Social Security number or FEIN to create a false identity. There's even a name for this scam -- "file segregation." You're directed to apply for a FEIN using IRS Form SS-4, and, when the new number is received, to use it when applying for credit. It is illegal -- and stupid. The credit report of the new FEIN will show no transactions -- good, bad or indifferent. Who's going to buy that?

3. Credit repair claims that are not true:

• Getting a new federal identification number is legal and supported by the government, after all, you use a government form to get one. See 2 above for the truth on this one.

• You will not be able to get credit for 10 years if you have a bankruptcy on your credit report. Building your credit worthiness after a bankruptcy takes time, but not necessarily 10 years. A subsequent history of steady employment and prompt payment of bills will probably position you as a good credit risk long before the 10 years have passed.

It takes time to get into such bad financial trouble that bankruptcy is the only way to start fresh. It also takes time to develop the new habits that will bring the financial independence you deserve. Take your time -- it will come.

DOROTHY ROSEN has a master's degree in finance, with a specialization in accounting, from the Kellogg Graduate School at Northwestern University in Evanston, Ill. Rosen has more than 15 years of experience in the financial arena, serving in Illinois and Florida as a certified public accountant, financial consultant, expert witness and educator. She is owner of Dorothy Rosen, CPA, a public accounting firm that serves individuals and small businesses.