"Credit washing" is a type of first party fraud that involves an individual (or a credit repair organization on their behalf) falsely claiming to be a victim of identity theft in order to have bad tradelines removed from their credit report. This can improve the person's credit score and lead to extensions of credit and loans to people who otherwise may not qualify.
In this paper, we present an analysis of 9,000,000 consumers and their credit reports that illustrates the negative consequences credit washing has on lenders and the credit reporting system.
Of note:
- The average washed tradeline had a charge-off of $823.
- We estimate total losses in the credit card industry from credit washing to be more than $297 million.
- Suspected credit washers saw a median improvement in their credit score of 40 points in the span of 8 months.
- We've identified several patterns and consumer behaviors that can give financial institutions an edge in spotting credit washing attempts.
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