Unexpected Account On Credit Report


I wanted to share a surprising credit reporting experience that I recently had. My credit is very good, and with all of the issues about identity theft and preventing identity fraud, I’m using a credit monitoring service. I also have my credit frozen via a fraud lock on all three credit bureaus (Experian, TansUnion, and Equifax). So basically, no one can open an account under my name, because the entity trying to open the account will see the fraud alert and will be unable to proceed. This approach has given me a lot of peace of mind over the last few years since I started using it. I do pay about $15/month, and Experian requires that I pay $10 each time I want to temporarily unfreeze my credit when I need to get a loan, buy a car, etc. For me the money and slight inconvenience is well worth the peace of mind.

So this has been cruising along for years until just recently when I had an unexpected credit reporting surprise! I enrolled my son in an extra-curricular activity (less than $100/month). On the registration form it asked for my SSN. I refused to provide it, and they didn’t have a problem with that, so I figured that there would be no way for them to access my credit report or impact it in any way. Well, I was wrong! A few months later I got an alert regarding a new account on my credit report. I didn’t recognize the name of the company because the facility uses a third-party company to process the monthly credit card payments. Reviewing the details, I figured out that it was my son’s membership. It’s only a five-month contract, after which there’s no term obligation and the payments simply go month-to-month.

Needless to say that I was completely and utterly shocked that this could possibly show up on my credit report. It was opened as an installment payment service agreement for the full cost of the 5-month term. What I learned through doing further research was that any entity that reports to credit bureaus can put something on your credit report by simply having your name, address, and date of birth! The only validation the club did was to check my driver’s license, which I expect isn’t very hard to forge.

I first called the processor (Affiliates Acceptance Corp. or AAC) to see how this was possible. They noted that they were processing the transaction as requested, and that these payments are a Note. To me a Note is a financial instrument used when providing a monetary loan. For this membership, it’s my credit card bank that’s really loaning me the money. What I learned is that the service agreement is still reportable. I then also spoke with the club itself, and they told me that this is how it’s done. They also tried to convince me that this is normal business practice. Have you ever seen such reporting for other standard memberships like the gym or yoga, or service agreements you have with your cable or satellite provider, landline company, or wireless provider? I personally have NEVER seen such things reported on my credit report, and most of those are worth far more than this lowly 5-month contract. Typically they only report to the bureaus if you’re late on a payment or otherwise default on your agreement/contract.

Yes, it’s true that an installment loan that is paid on time is actually a very good thing to help build good credit, and that’s how I originally built good credit (ex. car payments). However, it irks me that this is on my report without my knowing that it would be there! Also, I researched AAC and found that they have a lot of Better Business Bureau (BBB) complaints, and are not an accredited business. And while the value of the BBB information is debatable, my concern is that if something goes wrong and they report late payments, they could impact my credit score. Is this a big deal for such a low amount? Absolutely! Even one small payment under $100 going to collections can have a dramatic impact on a credit score, which in turn can costs thousands upon thousands of dollars of costs in the long run when ultimately paying a higher interest rate on a car loan, home loan, etc. So yes, it IS a big deal. For example, if I lose my credit card, or get one with a new expiration and forget to update the AAC account, these payments would fail. If they don’t notify me, it could end up going into late payment status, even though I have no intention of ever defaulting.

Anyway, the club ultimately called AAC and had my account reporting status changed, so I’m told it should drop off of my report altogether (though this could take several months). I personally refuse to work with payment agencies like AAC. I would rather pay everything upfront than have a recurring payment and essentially be in bed with one of these entities. At least that’s my personal opinion and comfort level. All I can say is beware, and know that you don’t have to give someone your SSN for it to show up on your credit report! And who’s to say that someone couldn’t use your information to setup agreements like these. While they couldn’t get an actual loan without your SSN, it could wreak havoc on your credit when they don’t pay, but it’s legally under your name!

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