Freddie Mac has issued a warning for homebuyers who allow con artists to “clean up their credit” for a fee.

"Who doesn't want the highest credit score possible to garner the most-favored terms?" Freddie Mac notes on its website. "For many Americans with consumer credit negatively impacted by the housing crisis and fluctuating economy, it's easy to be lured by the promise of a raised credit score," Freddie Mac says. "Schemes that falsely raise credit scores will land borrowers in scalding hot water – as well as cost you time and money combating both origination- and servicing-related fraud."

Freddie Mac highlighted three types of common fraud schemes to raise credit scores:

1. Disputing credit with credit agencies 

“FICO Score Open Access for Credit and Financial Counseling” is a new program designed to assist borrowers with lower scores or less-than-perfect credit.  This program provides the individual with their FICO Scores together with educational materials to help them understand how lenders and finance companies generate credit scores, and how they can improve their scores by managing their finances and payments wisely.  It takes a little time to reverse bad credit, but in the long run is the best route to a healthy credit score. 

As is to be expected, scammers have found a way to use this program to their advantage:

Con artists encourage borrowers to contact credit reporting companies repeatedly to dispute debts on which they have actually defaulted with late or missed payments.  The promise is that the creditor may fail to react to at least one of these multiple charges, thereby causing the debt to be removed from their report briefly, resulting in a temporary rise in the borrower's credit score. In this short time frame, the borrower may be able to meet the requirements for – and close on – another home loan before the credit reporting agencies catch up and reinstate the defaulted obligation on the borrower's actual financial assessment.

 2. Claiming identity theft falsely

 A few organizations urge purchasers to dishonestly claim identity theft to have defaulted debts removed from their credit report. 

Desperate to have their credit cleared, borrowers are convinced to provide affidavits of identity theft and even police reports to “prove” that the valid debt on their report is not actually their debt.  Once again, this process removes the valid debt from their report temporarily while the credit reporting agencies investigate, often discovering false affidavits and fake police reports. 

3. Abusing Credit Protection Numbers 

Utilizing a Credit Protection Number (CPN), which takes the place of a Social Security number and is most often used by the wealthy, famous and even politicians in order to conceal past credit issues – can be a risky move and lenders are catching this type of fraud more often than not. 

CPN’s (credit protection numbers) are sometimes assumed by those with low credit scores to create new and misleading credit profiles.  CPN’s were not created to be used as a fraudulent way to leave a bad credit score behind, and mortgage lenders are becoming more savvy in dealing with this form of fraud. For instance, Freddie Mac will not accept a mortgage loan originated with a CPN instead of a Social Security Number.  Borrowers who let scammers convince them to use a CPN are setting themselves up for identity theft charges and could face legal trouble down the road.

States have differing penalties for these types of mortgage fraud.  In Florida, if you are found to have obtained a mortgage fraudulently, penalties range from being charged with a first degree misdemeanor up to a third degree felony depending on the extent of the fraud, mandatory prison sentences and required restitution to the defrauded agency.