Quick Credit Fixes Can Be Risky

Typically, Stearns says, he buys extinguished loans from banks and lets his customers "assume" the zero-balance blemish-free "debts." The previous borrower is unaffected.

Whether or not the techniques are legal -- Stearns says they are, and the Federal Trade Commission declined to comment on TradeLine's practices -- they smell funny to many people.

"We would have concerns that it might encourage possible consumer fraud," says Allen Fishbein, director of housing and credit policy at the Washington, D.C.-based Consumer Federation of America. "It appears that it could be used by consumers in a way that would not be appropriate."

Neither Equifax nor TransUnion were impressed by the TradeLine tactic, either. TransUnion suggests unhappy consumers review their credit files regularly as well as pay bills on time.

Piggybacking could also spell big trouble for some consumers: If such an "enhanced" credit score were to be used to borrow money, it could constitute loan fraud. And that would be the last thing a beleaguered homeowner would need.

The techniques also pose a potential threat to the integrity of the secondary loan market. The true credit rating of a borrower is important information for investors, so they can figure out the appropriate price to bid for the debt.

But if the credit scores are higher than they should be, investors could pay too much for the debt they purchase and themselves be assuming more risk than they wanted. That should trigger some concern, not least because lack of transparency about loan portfolios has been a major contributor to the credit-market problems of the past several months.