Auto lenders are on the lookout for credit washing scams

What’s been referred to in the industry as a credit washing scam tactic appears to be growing in popularity in auto loans – including some fraudsters who on paper resemble borrowers with sound, low-risk credit. This according to a new study from Chicago-based credit reporting bureau TransUnion.

“Credit washing is a type of fraud that’s related, obviously, to a credit report. It has existed in the past, but it continues to be a growing concern,” Satyan Merchant, SVP, auto and mortgage business leader at TransUnion, said in a phone interview with WardsAuto.

What happens in credit washing is that a crooked account holder contests adverse information on their credit report – something that lowers their credit score, like a delinquency or default. This leads to claims that the information causing damage to their credit score is in error, or the result of identity theft, and they are being falsely penalized.

Wolf in sheep’s clothing

In a nutshell, the scammers often claim they’ve been scammed.

Fraudsters are aware that credit bureaus receiving such a complaint commonly are obliged temporarily to stop factoring that credit account into the holder’s credit score, while the credit bureau investigates the claim. Lenders call this “data suppression” on the account holder’s credit report.

“We – not just us, but all the credit bureaus – do need to provide that opportunity … to make any fixes as needed,” Merchant said. From the point of view of potential fraud, the problem is that suppressing the negative data gives a temporary boost to the account holder’s credit score, he said.

Time to ‘bust out’

When the score improves, that can be the signal for a scammer to take advantage of the temporarily inflated credit score and get an auto loan they have no intention of repaying.

Fraud experts say that identity theft often involves a long process. The holder of a stolen, fake, or synthetic identity starts out with small accounts, which they keep paid-up. Gradually, they add more and bigger purchases, mimicking a legitimate borrower, with an improving credit score.

An auto loan is often the biggest and final phony loan in this scheme, before the scammer “busts out” and disappears with the car and whatever else they may have purchased fraudulently.

A growing problem

According to TransUnion, incidents of “data suppression related to fraud allegations” were up 228% in July 2025, versus January 2024.

There are legitimate claims of fraud within those numbers, but the numbers likely include crooked credit washers, too.

Merchant said that all credit bureaus are refining ways to identify credit-washing scammers faster.

Warning sign

One giveaway could be that scammers tend to file a complaint regarding the one account in their credit history which, if suppressed, gives the biggest possible temporary boost to the credit history overall, Merchant said.

TransUnion said in the study, “Credit washing is a new concern lenders need to watch.”