Could Mortgage Fraud Be Killing Your Credit?

How Mortgage Fraud Works

Manage Your CreditWith all of the chaos out there in the housing market, including issues of mortgage lending fraud, subprime lending fraud, and real estate fraud, there's a huge potential for errors to affect an individual's FICO® credit rating and credit history. Lenders are getting cautious, borrowers are getting desperate, and many doors are left open to all kinds of fraudulent or deceptive credit activities.

Mortgage fraud can affect your credit in several ways. If you're a homeowner, an illegitimate third party can sometimes steal the deed to your property, default on the loan, and leave the debt behind for you to clean up. The "property side" of identity theft is something homeowners are looking out for to safeguard not only their property holdings, but their credit score and credit report.

Another way mortgage fraud works on individual credit score ratings is through "associated use" or "piggybacking." This process is growing at an alarming rate and causing much concern amongst lenders. This kind of associative credit activity is called fraud by many, though it isn't always expressly illegal. Associated use relies on the tradition of "co-signing," whereby someone with good credit (traditionally a family member) may add another name to their credit for a loan application.

These days, third-party companies have unscrupulously become involved in this kind of activity, linking up borrowers with bad credit and a non-borrower with a good credit score. This gives the home loan applicant a free ride in terms of credit history, but it can damage the good credit report of the sometimes-unwitting co-signer. The specifics of these associated-use agreements can be hidden from the person holding the good credit rating, and the results can be damaging.

In addition to these kinds of mortgage fraud schemes, some activities by selling agents and others, including inflated appraisals, home flipping, and other complicated practices can also be fraudulent.

For all of these cases, looking at your credit ratings and monitoring your credit cuts down on your exposure to dishonest agents, borrowers, and lenders. Use tools like credit monitoring to become your own credit advocate and see if there are any unauthorized names, credit lines, or other marks on your credit. Check into the records of all three big credit agencies, and ensure that your hard-earned credit rating isn't being harmed by someone else's fraud.


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