McKenna said zombie debt is an issue that Point Predictive hadn’t seen until now. The term refers to bad debt that’s so old it is uncollectible and has disappeared from credit reports. A credit repair company will buy somebody’s stale debt and resurrect it on the credit report of a customer as a “fully paid” item. Suddenly, thanks to zombie debt, the consumer appears to have a better payment history.
Data furnishing exploitation has been around for years but has recently become more popular, McKenna said. The scheme involves companies lying to credit bureaus that they’ve given a consumer a loan and are receiving payments or had the debt paid in full.
“Synthetic identity is an endless cat-and-mouse game,” Point Predictive wrote. “Just as auto lenders catch on to one scheme and react, a new loophole in the system is identified by the mouse and exploited.”
“Credit washing” — improving bad credit by pretending that negative credit report trade lines are the result of identity theft — also grew significantly in 2022, shooting up to 0.5 percent of applications from an estimated 0.3 percent. In fact, some lenders told Point Predictive they suspect up to 98 percent of their identity theft cases are really credit washing.
