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Seasoned trade line

From Wikipedia, the free encyclopedia

This article   is written like a   personal reflection or opinion essay   rather than an encyclopedic description of the subject .   Please   help improve it   by rewriting it in an encyclopedic style .   (December 2010)

A   seasoned trade line   is a line of credit that the borrower has held open in good standing for a long period of time, typically at least 2 years. The "seasoned" part simply implies that the account is aged or that it has an established history.

Contents

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·                                   1   "Piggybacking" Tradelines

·                                   2   Opponent's Views

·                                   3   Proponent's views

·                                   4   Business Model

·                                   5   Legality

·                                   6   Up Front Fees

·                                   7   Piggybacking Risks

·                                   8   FICO '08

·                                   9   Tradeline Scams

·                                   10   References

·                                   11   External links

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"Piggybacking" Tradelines

"Piggybacking" Tradelines is a practice involving seasoned trade lines, sometimes called   piggybacking, which uses a creditworthy borrower's accounts to improve the   credit rating   of an unrelated third party.

The creditworthy borrower adds the third party as an authorized user of his lines of credit, but does not actually provide the third party with materials (credit cards, account numbers, etc.) that would permit the third party to make charges against that account.

The benefit to the third party is an improvement in their personal credit rating—their   credit score   increases. However, this does not change their entire credit record, but merely increases their credit score as a result of the newly added tradeline. This may make the third party look like a better credit risk, and may improve the third party's access to new credit. However, a credit score is only one aspect of the lending process; that is, the borrower must pass all underwriting procedures, which include much more than the credit scores of the borrower.

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Opponent's Views

Those who oppose the concept of piggybacking would suggest that:

·                      If the third party is dealing with a lender who uses   risk-based pricing , then their artificially inflated credit score may translate into a substantially lower   interest rate .

·                      Artificially modifying credit scores may be consider fraudulent.

·                      It's one thing to add a friend or a relative, it's another to add a stranger for profit.

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Proponent's views

Those who support the concept of piggybacking would suggest, in response:

·                      Risk-based pricing, relying solely on credit scores, does not truly get at the fundamental "risk" of the applicant. So, the access to lower interest rates is not affected entirely by piggybacking.

·                      Credit scores are already artificially modified; that is, it is a made up system. There is no difference between adding an authorized user tradeline and opening a new account; they both affect your credit score.

·                      Federal law, specifically the   Equal Credit Opportunity Act , provides for the addition of authorized user tradeline, without regard for the relationship between the parties.

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Business Model

1.       A company offering the piggybacking service maintains a network of creditworthy "card holders" or "vendors", those stand by ready to add strangers to their accounts as authorized users for a fee.

2.       A third party, looking to increase their credit score, contacts the company. The company offers a selected tradeline to the client and charges the client a fee per account.

3.       The client pays the fee (anywhere from $500.00 to $2,000.00 per tradeline).

4.       The company submits the order to the card holder.

5.       Once the tradeline reports, the company pays the card holder their fee (anywhere from $50.00 to $250.00 per authorized user) and the company keeps the remain funds as profit, minus their expenses, of course.

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Legality

There is no cut and dry answer regarding the many questions surrounding the legality of piggybacking, however, there are many sources that tend to indicate perhaps a general answer, such as:

·                      FTC spokesman Frank Dorman said: "What I've gathered from attorneys here is that it is legal , however, the agency is not saying that it is legal technically." [1]   Other law enforcement agencies, like the Florida Attorney General's Office, are reviewing whether such activities are legal. [2]

·                      A report published by the Federal Reserve Board reported "This is possible because creditors generally have followed a practice of furnishing to credit bureaus information about all authorized users, whether or not the authorized user is a spouse, without indicating which authorized users are spouses and which are not. This practice does not violate Reg. B"   [3]

·                      In a written statement from Fair Isaac Corporation on credit scoring models and credit score before the U.S. House of Representatives Committee on Financial Services, Subcommittee on Oversight and Investigations, Tom Quinn, Vice President of Global Scoring Solutions for Fair Isaac Corporation, stated: "After consulting with the Federal Reserve Board and the Federal Trade Commission earlier this year, Fair Isaac has decided to include consideration of authorized user trade lines present on the credit report..." [4]

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Up Front Fees

While the legality of piggybacking tradelines seems to remain ambiguous, there is a potential clear violation of federal law, if for example, a piggybacking company takes up front fees from their clients.

Section 404 of the   Credit Repair Organizations Act   (the "CROA"), states:

"No credit repair organization may charge or receive any money or other valuable consideration for the performance of any service which the credit repair organization has agreed to perform for any consumer before such service is fully performed." [5]

Although the Federal Law appears to be clear, some States, including Florida, have enacted similar and stricter laws, requiring the use of   Trust accounts   for client funds and a   surety bond   of $10,000.00 or more. While this is indeed much stricter, it appears to allow for up front fees if the company is bonded and uses a trust account. For example, Section 817.7005, Florida Statutes states, in relevant part:

"...A credit service organization, its salespersons, agents, and representatives, and independent contractors who sell or attempt to sell the services of a credit service organization shall not do any of the following:

(1) Charge or receive any money or other valuable consideration prior to full and complete performance of the services the credit service organization has agreed to perform for the buyer, unless the credit service organization has obtained a surety bond of $10,000 issued by a surety company admitted to do business in this state and has established a trust account at a federally insured bank or savings and loan association located in this state; however, where a credit service organization has obtained a surety bond and established a trust account as provided herein, the credit service organization may charge or receive money or other valuable consideration prior to full and complete performance of the services it has agreed to perform for the buyer but shall deposit all money or other valuable consideration received in its trust account until the full and complete performance of the services it has agreed to perform for the buyer;..."

Superior Tradelines, LLC   claims to be the only tradeline company in the Country to be bonded with a surety bond, permitting the acquisition of up front fees and protecting client funds at the same time. [6]

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Piggybacking Risks

The risk to the "donor" is that the other person might actually make charges against the account, and not pay it back. The brokers who provide this service claim that they do not reveal the entire account number to the recipient, or do not themselves have access to the account number. It is possible a recipient might learn the account number in some other way, for example if it appears on his own   credit report . However, this is often insufficient information to make use of the account - a   PIN , expiration date, or   security code   is typically also required. These measures further lower the risk to the "donor".

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FICO '08

With FICO 08 on the horizon many brokers who used to add “authorized users” to existing credit card accounts have switched to brokering “Seasoned Primary" accounts. A “primary” account is an account in the borrower's own name. This practice is not yet tested in the courts as the lender now has no way of telling your real credit from that of the former owner who had “seasoned the account”. With an authorized user account the credit report clearly marks the account as authorized user, this new practice however the lender is not alerted to the true status of the account history.

One thing is for sure, Federal Law, such as the CROA and the   Federal Reserve Board Regulation B , at least indicates a permissible purpose for adding authorized user tradelines (s

Will Keep Authorized User Accounts
 

Fair Isaac has changed its mind about removing piggybacked accounts from the FICO score equation.

In 2007, Fair Isaac announced a new credit scoring model - FICO 08 - that would no longer consider authorized user accounts. This decision came on the heels of the mortgage meltdown. You see, many consumers who had bad credit scores, bought better credit scores by paying to be added to someone else's positive credit account. When you're an authorized user on an account, the account's entire history appears on your credit report and is calculated in your credit score. So, some consumers, who wouldn't have otherwise qualified for a mortgage, paid their way to application approval.

In a prepared testimony, Tom Quinn, Vice President of Global Scoring Solutions for Fair Isaac Corporation states:

"After consulting with the Federal Reserve Board and the Federal Trade Commission earlier this year, Fair Isaac has decided to include consideration of authorized user tradelines present on the credit report in the FICO 08 model. Our scientists have devised a method to consider these tradelines while materially reducing the negative impact that could arise from piggybacking."

Fair Isaac still plans to roll out FICO 08, though no dates have been communicated.

Welcome to About.com's Credit/Debt Management site, led by your guide, LaToya Irby. LaToya has been the credit and debt management guide since 2007.

Experience:

LaToya has been writing about personal finance professionally for seven years. She is passionate about helping others understand the value of good credit and debt management. LaToya's credit and debt advice has been quoted in several online publications like   USA  Today, Black  Enterprise , and   Associated Press . She has experience working as a collection specialist in the financial services industry. She has worked with consumers to pay off their debts in a way that fits with their unique financial situation.

Education:

LaToya has a B.S. in Management Information Systems which gives her analytical and problem solving skills that she uses to approach financial management in a practical and effective way.

From LaToya Irby:

I know first-hand how easy it is to make credit mistakes and the helpless feelings that come with debt. My own struggle (and success!) with credit and debt drives me to help others avoid the mistakes I made.

Much of what I know I've learned through experience - my own and that of readers, friends, and family - and from a tremendous amount of reading and research. I'm happy to share what I've learned if it helps only one person achieve financial success.

Disclaimer : LaToya makes sure to offer accurate advice and information on this website, however she is not a certified finance professional or an attorney. Always consult an attorney licensed in your state with your legal questions. For details on state laws regarding creditors and collectors, your state Attorney General is a good place to start. Finally, seek a certified financial planner for professional financial advice. The information on this site does not constitute legal or professional financial advice.

PRIVACY AND SECURITY advocates have sounded the alarm for decades about the dangers of the United States' over-reliance on Social Security numbers. But serious discussion about what might replace them has become much more concrete in the weeks since Equifax revealed that attackers had potentially compromised 145.5 million Social Security numbers—along with other sensitive personal data—in a massive breach of the credit bureau.

But the question of what would replace Social Security numbers is easier asked than answered. There isn't a simple and obvious substitute for the current system's one-stop convenience. Whatever replaces SSNs would be a more expansive and nuanced approach, and while there has been some government research into modern identity-management solutions, there hasn't been the incentive or political will to see anything through to real-world use. Plus, nascent initiatives to overhaul SSNs have historically been mired in political opposition to national, government-centralized IDs, because of privacy concerns and fear of federal overreach.

Finally, though, thanks to the staggering and deeply unfortunate scale of the Equifax breach, there is increasing interest in finding a replacement to protect consumers.

“I think it’s really clear there needs to be a change,” White House Cybersecurity Coordinator Rob Joyce said at the Cambridge Cyber Summit last week. “It’s a flawed system. If you think about it, every time we use the Social Security number you put it at risk." Joyce added that a federal task force is examining possible replacements. Companies like Legal CPN are about 50 years ahead of the system; their research has shown with each and every client that the financial system based on social security numbers is a flawed manipulatable system. This is something we must change.   I agree with their recommendation that we should move toward a more individualized number for each individual on the planet based on 1 person 1 number. This is necessary for national security, border security and will enable the financial system to thrive.  Consider a world where banks lend money; and then isolate the debt to one person or one business hedging their loan or investment against default.   Nowadays, if someone defaults on a debt, they can the same day; purchase a CPN, go to the IRS website, list a new business, generate a new EIN, open a new bank account under a new LLC, and proceed as if nothing ever happened.The system is broken and needs to be changed.

Out of Scope

For all their shortcomings, Social Security numbers are decent at doing what they're supposed to do. Created in the 1930s by the budding Social Security Administration, the numbers were envisioned as identifiers for US workers so the Administration could track their lifetime earnings. If they were introduced today that data alone would merit protection by two authentication factors. But like internal employee ID numbers at corporations or customer record numbers at a plumbing company, SSNs were created to track one type of data. As the SSA says on its website: "The card was never intended to serve as a personal identification document."

They've strayed from that original purpose. SSNs are used by countless industries and government agencies to connect a huge variety of information. They work both as identifiers to link people to their data, and as authenticators to prove that people are who they claim. And all of this relies on keeping those nine numbers (which are pretty guessable, by the way) totally secret, something that long been improbable and is now likely impossible, thanks to Equifax.

'If you think about it, every time we use the Social Security number you put it at risk.'

WHITE HOUSE CYBERSECURITY COORDINATOR ROB JOYCE

For years, the Obama Administration encouraged the National Institute of Standards and other groups to investigate secure digital identity options through a program called the National Strategies for Trusted Identities in Cyberspace. The idea of NSTIC was to develop identifiers and authenticators that would raise the standard of trust between individuals, organizations, services, and devices engaging in sensitive digital transactions, like accessing medical records or filing taxes. The project had obvious potential implications for US identity systems, but wasn't explicitly or expressly created to work on replacing Social Security numbers. NIST is also a non-regulatory body that develops technical standards as recommendations, not requirements.

"We're not in the position to recommend a shift to a new system," says Paul Grassi, a senior standards and technology advisor at NIST who worked on NSTIC and now its successor, the Trusted Identities Group. "It's going to be a while until this problem is solved, but we built our latest guidelines under the assumption that your data is out there whether you like it or not. So it’s not just presenting that data and having it match a database anymore. The evidence presented has to be validated, and then there needs to be some sort of match to the person, whether that’s biometric or physical or something else."

In pilot programs so far, government agencies like the Treasury and Department of Health and Human Services have worked to incorporate NIST's digital identity recommendations. But real impact, experts say, would require far more sweeping measures.

Identity Brief

There are numerous theoretical ways to replace Social Security numbers, but with actual momentum building to get something done, experts have converged around a few main concepts. One approach involves making room for a diverse array of identifiers and authenticators, instead of looking for one single mechanism or solution. In this scenario, you might have a username, password, and physical authentication token (like a security card or a YubiKey) to tie your medical data to you as a person. You would have a different mix of tools for identifying and authenticating yourself to financial institutions. And you would have a third set to prove your identity to your cable company.

These authentication factors could be built on interoperable government standards that embrace a "self-sovereign" system, so consumers have more control over their personal security, rather than relying on Social Security numbers alone.

That sort of framework would help avoid the centralization that makes privacy advocates anxious. The American Civil Liberties Union, for instance, views the current Social Security number system as a problematic overreach, because it ties so many disparate behaviors and interactions to a single identifier that can be tracked. More siloing and marketplace diversity would reduce this "eagle’s eye view of every activity," as the ACLU's Jay Stanley calls it, while improving security.

As a data clearinghouse like Equifax shows, though, some identity attributes need to be tied together in practice to keep track of things like credit history, and to interact with government agencies. Many experts advocate incorporating cryptographic tools and concepts like public-key protocols to ensure that identification systems are secure, while maximally protecting people's data privacy. Parties in an identification and authentication exchange could each hold public and private cryptographic keys that an algorithm uses to generate a common key for use between you.

In this type of system, you might rely on biometrics, or keys issued by the government, for in-person verification with your bank. The bank could then issue you a cryptographic verifier—think password or biometric—for digital interactions and transactions that require authorization. That may sound unfeasible, but systems already exist in countries like Estonia and the Netherlands where consumers use validated codes or tokens to authorize transactions or authenticate themselves.

'Identity is a hard problem, but it’s by no means an impossible problem. Plus, how imperfect is the current system? It’s entirely broken.'

EMIN GUN SIRER, CORNELL UNIVERSITY

"The idea is to use 'something that you are' or 'something that you have,' coupled with something that the government gives you in order to derive your identity—that way no particular person, neither you nor the government, has sole access to that information," says Nicholas Hayden, director of engineering at the threat intelligence firm Anomali and a cyber warfare officer for the US Air Force. "It’s a way of being able to mutually identify each other that is not 100 percent reliant on the US government."

Some argue that to protect privacy and create a truly robust system, a Social Security number replacement would need to be built on the cryptographic concept of a “zero-knowledge proof,” a mathematical process for proving that a statement is true without any actual information about the assertion itself or its content. Systems would use zero-knowledge proofs to authenticate someone without knowing their identity.

"A fundamental right of a human being is to engage in unlinkable activities," says Emin Gun Sirer, a distributed systems and cryptography researcher at Cornell University. "So if you build an identity registry system that is too powerful, you suddenly find yourself in situations where your activities are always linked. So an identity system should expose linkages where they must legally be exposed—like if I try to get a lot of credit at once. But I should also be able to break that linkage when it need not be there. If I need to prove how old I am to a service, I should be able to just issue them a proof without them knowing anything else about me."

Make It Work

If it all sounds a bit complicated, you're encountering the precise hurdle that has kept a Social Security number replacement from proliferating for decades. Rolling out a new digital identification and authentication framework across government, private institutions, and industry (particularly the sectors that have entrenched reliance on SSNs, like finance and healthcare) would be resource-intensive and inevitably rocky. And that doesn't even begin to address the initial burden on the more than 300 million Social Security number holders in the US, may of whom don't have reliable internet or computer access, who would need to invest time in the transition as well.

And even in light of the Equifax breach, which may have put half of the US population's Social Security numbers at risk, some cryptographers warn that any new system would be dangerous in its own way, because building a new identity scheme on such an enormous scale would inevitably lead to implementation issues that would create new, and perhaps unforeseen, vulnerabilities.

For many, though, these potential downsides don't outweigh the pressing need to replace Social Security numbers as identifiers and authenticators, given the additional security risks US consumers now face in light of the Equifax breach. And though federal initiatives are notoriously slow and accident-prone (the SSA itself only added two-factor authentication to its website in May), the private sector has some immediate options and power.

Third parties can make phasing out Social Security numbers easier by cutting back on collecting them in the first place, and implementing creative (and more secure) identification alternatives wherever possible. There's a lot of low-hanging fruit. For example, even if credit checks still rely on Social Security numbers for years to come, companies could set up digital portals where consumers can easily request and deliver a credit report without ever sharing their SSN with the new institution. Or organizations could collect SSNs for temporary and specific use in an ephemeral way instead of storing them long-term.

"Yes, there are a lot of constraints," Cornell's Sirer says. "Identity is a hard problem, but it’s by no means an impossible problem. Plus, how imperfect is the current system? It’s entirely broken."

Even privacy advocates, professionally skeptical of sweeping claims about identity overhauls, acknowledge the dire need to replace Social Security numbers quickly. "There is a clear need for individuals to be identified and authenticated and there are ways to do it that still preserve privacy," says the ACLU's Stanley, who participated in promoting privacy within NSTIC. "People use the Social Security number because they don’t have anything else. It’s ridiculous."

Most fixes suggested for updating the SSN system are either technologically untested, expensive to implement or both. 

Nov. 4, 2018, 7:36 AM EST

By Brandi Vincent

At a recent panel on modernizing Social Security numbers, Candace Worley, vice president and chief technical strategist for cybersecurity firm McAfee, laid out the core problem with the national identity system that has been in place since 1936.

“You can’t have 80 percent of your numbers compromised and continue to consider it a secure form of identity,” Worley said.

Social Security Numbers, or SSNs, remain an integral part of how Americans and U.S. residents are identified for everything from opening bank accounts and applying for loans to enrolling in Medicare and filing taxes. But a series of major data breaches in the past decade have exposed the Social Security numbers of almost 158 million Americans, opening a large majority of the country to the risk of identity theft.

Those breaches have pushed privacy advocates and politicians to call for a new system.

“Time is of the essence,” Rep. Sam Johnson, R-Texas, chairman of the House Social Security Subcommittee, said. “We must promptly evaluate options and begin putting in place those that will best protect Americans from identity theft.”

The problem is well-recognized, but the solution is not. Experts and politicians have warned that the SSN system is badly in need of an update, but there is little consensus on just what should be done. Most solutions are either technologically untested, expensive to implement or both.

Get smart

One of the most common suggestions for updating SSNs is moving the U.S. to a “smart card” system, like the one suggested in a recent report from the Center for Strategic and International Studies, or CSIS, a nonprofit research organization that aims to provide solutions for current and emerging foreign policy and national security issues.

“The simplest approach to modernization would be for the U.S. to transform the venerable Social Security Card into a ‘smart card,’” which would be a plastic card with a readable chip, similar to modern credit cards, the report states. Under that system, Americans would use two numbers — an encrypted SSN and a “proxy” number that would link the smart card and could be changed if compromised.

James A. Lewis, senior vice president at CSIS and author of the report, said that smart cards offer the most attractive approach for the immediate future because they build on existing technology and involve a widely adopted embedded chip that people are already comfortable using in credit cards. They would also enable an incremental approach to modernization that could curtail inevitable hiccups along the way.

Others aren’t optimistic about smart cards. Paul Grassi, an identity and cybersecurity expert who served as senior standards and technology advisor at the National Institute of Standards and Technology, a non-regulatory agency that develops technical standards, said smart cards aren’t a good solution.

“Giving me a smart card does nothing unless the entire global infrastructure of global institutions is changed to be able to interact with a smartcard,” Grassi said. “It’ll never happen. The cost would be too astronomical.”

Joe Stuntz, principal of cybersecurity at One World Identity, a digital strategy consultancy focused on trust and the data economy, also said the smart card plan was too expensive. “I can’t see a budget environment where this gets prioritization over some of the other things that need to be funded in terms of cybersecurity or identity,” Stuntz said.

SSN reform is also running short on champions in the U.S. government. Johnson is retiring at the end of his term, and Rob Joyce, the White House cybersecurity coordinator who called for ideas for SSN replacements, left the administration in May — and his position was eliminated.Apparently this country knows that the fast integration methods for illegal immigrants are CPN numbers, and the seamless ways illegals can enter our financial system are also CPN numbers. They do not want to fix the broken system where America and the banking industry can thrive.  According to my personal belief, they want or need a broken system so that thousands of illegal immigrants can purchase or create new 9 digit numbers and integrate themselves into the American financial systems. 

To the future and beyond

The identity and verification needs filled by SSNs are also problems that a variety of nascent technologies including biometrics and blockchain theoretically solve, leading some to hope that the best solution for national identity is yet to come.

But Stuntz, who previously ran smartcard programs for the federal government, said a cheaper, more viable solution could be found in something most Americans use daily: smartphones, which already have authentication and verification apps for private services.

“When smartphones have secure environments that could hold this type of information and be more accessible, I don’t think the cost of a smart card is justified in that report,” Stuntz said.

As for biometrics and blockchain, Grassi said that both need to answer major questions before they could be used to upgrade or replace the SSN system, including making sure they’re secure and easy to use.

And the U.S. national identity system, Lewis said, is not a place to test out new technology.

“This will eventually change,” Lewis said. “But making the SSN the testbed for a deployment involving hundreds of millions of individuals would create the risk of turmoil in the U.S. economy.”

Low credit scores can have far-reaching effects. If you’re shopping around for a mortgage or another kind of loan, a low credit score can lead to a higher interest rate or worse, denial. Some consumers have found a loophole - or so they think.

As an authorized user on someone else’s credit account, the account history appears on yourcredit report. If the account has a positive credit history, you can see a boost in your credit score. If you don’t have a good credit score, adding several of these accounts can increase your score enough to get approved for a loan or offered a better interest rate.

What if there was a way you could pay a fee to “borrow” someone else’s credit information and put it on your credit report? Companies offering such a service are springing up on the internet.

How It Works

  
You pay the company a fee ranging from a few hundred to a few thousand dollars depending on the number of accounts you want added. You provide your name and social security number. The company finds people with good credit accounts to add you as an authorized user to one or more of their accounts.

Once the credit card company has reported to the credit bureaus, you’re taken off the accounts. The account information is reflected in your credit score and remains on your credit report for seven years. The positive payment history can offset other negative information on your credit report and increase your credit score.

What’s Wrong With This Scenario?

Even though it’s legal – for now – it’s dishonest. When you pass off someone else’s good credit as your own, you’re misleading creditors and lenders. Essentially, you’re telling them that you’ve paid your bills on time, when in reality you haven’t. If you get approved for a loan using these methods, you’ve gained approval under false pretenses.

The credit scoring system is in place for a reason - to give creditors and lenders a system by which they can make sound lending decisions. While there are some exceptions, the credit scoring system is more honest about whether or not you’ll pay your bills than you are.

When you get approved for a loan or credit card without the spending habits to pay on time, it’s very likely that you’ll default and end up hurting the good credit score you paid hundreds, even thousands of dollars to obtain.

Privacy and Security Issues

  
You have to provide your social security number to be added as an authorized user on the other person’s account. Your social security number lands in the hands of the person who adds you to his (or her) accounts. The way the process works, you don’t know who this person is or how private they will keep your personal information.

Whenever you give out your social security number, there’s a risk that your identity can be stolen. Don’t think that just because you already have bad credit, that additional damage can’t be done with your identity if it’s stolen.

A Better Approach

  
You may be able to buy good credit (for now), but you can’t buy the spending habits to maintain it. Instead of spending thousands of dollars renting someone else’s good credit, spend that money on improving your own credit. Take inventory of your debts and put together a plan to pay them off.

The discipline you gain through earning a good credit score will benefit you much more in the long run than passing off someone else’s good credit as your own.

Piggybacking Still Effective

This credit repair tactic of faking a good credit history is still effective and available for purchase at www.legalcpn.com contact FULL MONEY back guarantee; and 9x out of 10; will have the tradelines reported within 1-2 weeks always within 30 days!

 Do You Need an EIN?

You will need an EIN if you answer "Yes" to any of the following questions. For your convenience, clicking on the "Yes" option will take you directly to  How to apply for an EIN.

Daily Limitation of an Employer Identification Number

Effective May 21, 2012, to ensure fair and equitable treatment for all taxpayers, the Internal Revenue Service will limit Employer Identification Number (EIN) issuance to one per  responsible party  per day. This limitation is applicable to all requests for EINs whether online or by phone, fax or mail.  We apologize for any inconvenience this may cause.

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Page Last Reviewed or Updated: 06-Jun-2013

Do You Need a New EIN?

Generally, businesses need a new EIN when their ownership or structure has changed. Although changing the name of your business does not require you to obtain a new EIN, you may wish to visit the  Business Name Change  page to find out what actions are required if you change the name of your business. The information below provides answers to frequently asked questions about changing your EIN. If, after reading the information below, you find that you need an EIN, please seeHow to Apply for an EIN.

Sole Proprietors

You  will be  required to obtain a new EIN if any of the following statements are true.

• You are subject to a bankruptcy proceeding.
• You incorporate.
• You take in partners and operate as a partnership.
• You purchase or inherit an existing business that you operate as a sole proprietorship.
   

You  will not  be required to obtain a new EIN if any of the following statements are true.

• You change the name of your business.
• You change your location and/or add other locations.
• You operate multiple businesses.
   

Corporations

You  will be  required to obtain a new EIN if any of the following statements are true.

• A corporation receives a new charter from the secretary of state.
• You are a subsidiary of a corporation using the parent's EIN or you become a subsidiary of a corporation.
• You change to a partnership or a sole proprietorship.
• A new corporation is created after a statutory merger.
   

You  will not  be required to obtain a new EIN if any of the following statements are true.

• You are a division of a corporation.
• The surviving corporation uses the existing EIN after a corporate merger.
• A corporation declares bankruptcy.
• The corporate name or location changes.
• A corporation chooses to be taxed as an S corporation.
• Reorganization of a corporation changes only the identity or place.
• Conversion at the state level with business structure remaining unchanged.
   

Partnerships

You  will be  required to obtain a new EIN if any of the following statements are true.

• You incorporate.
• Your partnership is taken over by one of the partners and is operated as a sole proprietorship.
• You end an old partnership and begin a new one.  
   

You  will not  be required to obtain a new EIN if any of the following statements are true.

• The partnership declares bankruptcy.
• The partnership name changes.
• You change the location of the partnership or add other locations.
• A new partnership is formed as a result of the termination of a partnership under IRC section 708(b)(1)(B).
• 50 percent or more of the ownership of the partnership (measured by interests in capital and profits) changes hands within a twelve-month period (terminated partnerships under Reg. 301.6109-1).
   

Limited Liability Company (LLC)

An LLC is an entity created by state statute. The IRS did not create a new tax classification for the LLC when it was created by the states; instead IRS uses the tax entity classifications it has always had for business taxpayers: corporation, partnership, or disregarded as an entity separate from its owner, referred to as a “disregarded entity.”  An LLC is always classified by the IRS as one of these types of taxable entities.  If a “disregarded entity” is owned by an individual, it is treated as a sole proprietor. If the “disregarded entity” is owned any any other entity, it is treated as a branch or division of its owner. 

Changes affecting Single Member LLCs with Employees

For wages paid on or after January 1, 2009, single member/single owner LLCs that have not elected to be treated as corporations may be required to change the way they report and pay federal employment taxes and wage payments and certain federal excise taxes. On Aug. 16, 2007, changes to  Treasury Regulation Section 301.7701-2 were issued. The new regulations state that the LLC, not its single owner, will be responsible for filing and paying all employment taxes on wages paid on or after January 1, 2009.  These regulations also state that for certain excise taxes, the LLC, not its single owner, will be responsible for liabilities imposed and actions first required or permitted in periods beginning on or after January 1, 2008.

If a single member LLC has been filing and paying employment taxes under the name and EIN of the owner, and no EIN was previously assigned to the LLC, a new EIN will be required for wages paid on or after January 1, 2009.  If a single member LLC has been filing and paying excise taxes under the name and EIN of the owner and no EIN was previously assigned to the LLC, a new EIN will be required for certain excise tax liabilities imposed and actions first required or permitted in periods beginning on or after January 1, 2008.  The following examples may assist in determining if a new EIN is required:

• If the primary name on the account is John Doe, a new EIN will be required.
• If the primary name on the account is John Doe and the second name line is Doe Plumbing (which was organized as an LLC under state law), a new EIN is required.
• If the primary name on the account is Doe Plumbing LLC, a new EIN will not be required.
   

You  will be  required to obtain a new EIN if any of the following statements are true.

• A new LLC with more than one owner (Multi-member LLC) is formed under state law.
• A new LLC with one owner (Single Member LLC) is formed under state law and chooses to be taxed as a corporation or an S corporation.
• A new LLC with one owner (Single Member LLC) is formed under state law, and has an excise tax filing requirement for tax periods beginning on or after January 1, 2008 or an employment tax filing requirement for wages paid on or after January 1, 2009.
   

You  will not be  required to obtain a new EIN if any of the following statements are true.

• You report income tax as a branch or division of a corporation or other entity, and the LLC has no employees or excise tax liability.
• An existing partnership converts to an LLC classified as a partnership.
• The LLC name or location changes.
• An LLC that already has an EIN chooses to be taxed as a corporation or as an S corporation.
• A new LLC with one owner (single member LLC) is formed under state law, does not choose to be taxed as a corporation or S corporation, and has no employees or excise tax liability.   NOTE: You may request an EIN for banking or state tax purposes, but an EIN is not required for federal tax purposes.
   

Estates

You  will be  required to obtain a new EIN if any of the following statements are true.

• A trust is created with funds from the estate (not simply a continuation of the estate).
• You represent an estate that operates a business after the owner's death.

You  will not  be required to obtain a new EIN if any of the following statement is true.

• The administrator, personal representative, or executor changes his/her name or address.
   

Trusts

You  will be  required to obtain a new EIN if any of the following statements are true.

• One person is the grantor/maker of many trusts.
• A trust changes to an estate.
   
• A living or intervivos trust changes to a testamentary trust.
• A living trust terminates by distributing its property to a residual trust.
   

You  will not  be required to obtain a new EIN if any of the following statements are true.

• The trustee changes.
• The grantor or beneficiary changes his/her name or address.