Malicious Credit Report Freezes

In the course of detecting synthetic fraud, the team at SentiLink comes across many interesting tactics to misrepresent creditworthiness. One sophisticated tactic we've seen is the deliberate freezing or unfreezing of a given consumer's credit report at each of the different credit bureaus.

One of the prominent inputs in an applicant's credit score is the number of recent credit inquiries. A larger number of inquiries will lower an applicant's credit score (number of hard pulls is an input into most credit models). Although different lenders pull credit from different credit bureaus, over the course of credit use, an applicant's credit score should converge across the different credit bureaus.

However, one way an applicant can manipulate this is by freezing a specific credit report. Suppose there are 9 banks, 3 which first try to pull from Experian, 3 of which first try to pull from Equifax, and 3 of which first try to pull from TransUnion. Now suppose an applicant freezes just their Experian credit report. If the applicant proceeded to apply for credit from each of the 9 banks, their Experian credit report would have 0 inquiries (because it was frozen), and both Equifax and TransUnion would have between 3 and 6 inquiries with a total of 9. Now suppose the applicant unfreezes their Experian credit report and freezes their TransUnion and Equifax credit report. Many lenders have a fall-back system in place, so the next time the consumer applies for credit, the lender will eventually pull from Experian because they are unable to pull from Equifax or TransUnion. Since no previous inquiries are present on Experian, their credit score does not take into account the inquiries that "should have been" present on the credit report, and is consequently higher.

One very practical example of this is applicants who deliberately build credit through consumer banks to asymptotically hit lenders within specific verticals. Most installment lenders use TransUnion while most SMB lenders use Experian. As a result, we will see applicants deliberately freeze their TransUnion report to make themselves appear more creditworthy when applying with personal installment lenders. Similarly, we often see applicants deliberately freeze their Experian credit report who ultimately hope to apply with SMB lenders.

If you'd like to understand if you have applicants with this behavior present, take a consumer's credit report, look at individual tradelines opened in the past 2 years, and try to align each of those tradelines with an inquiry. If there are a substantial number of tradelines but very few corresponding inquiries or only inquiries that occurred after the tradelines, then there is a very reasonable chance this behavior is present.

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Max Blumenfeld is Co-founder and COO of SentiLink. Prior to SentiLink, Max led Risk Operations and Fraud Data Science at Affirm. Max holds a degree in mathematics and economics from the University of Chicago and was named to Forbes’ 30 Under 30 list in 2020.