Authorized User Piggybacking to End
Fair Isaac and Co.
has heeded the calls of lenders to amend its FICO credit scoring formula.
The major change is a halt to credit reporting for authorized users.
While some creditors never reported authorized user activity in the first place, others reported this information for years.
The result was that many people with limited or damaged credit history could benefit from the positive influence of seasoned credit accounts.
This was common among family members to help establish a credit history or to help prop up a damaged credit rating.
Many companies began offering to broker arrangements between those who needed additional positive accounts on their credit and those who maintained seasoned accounts in good standing.
For a substantial fee, you could be added as an authorized user on a stranger's account.
Despite the risks involved, many people flocked to these companies to help them gain additional points on their credit score.
These additional points were needed to help them qualify for loans that they otherwise would be denied for.
Some cardholders earned hundreds of dollars a month just by leasing out authorized user status to desperate people looking to shore up their credit score in a short amount of time.
By May 2007, the outrage of lenders that had been burned on an increasing number of defaults and foreclosures forced a change.
The influence of authorized users was eliminated through staggered changes that eliminated authorized user reporting at all three credit bureaus by September 2008.
Although the rewards were high for prospective homeowners looking to gain a last minute boost to their score, the risks were also high.
Many people suffered by being associated with a stranger's account that had experienced late payments or other negative reports.
In addition, both the buyer and seller of authorized user accounts exposed themselves to possible identity theft and abuse by turning over their personal information to these companies that brokered the transactions.
In the end, authorized users would no longer receive credit for account history.
Instead, they would have to rely on their ability to establish credit and to maintain their creditworthiness.
has heeded the calls of lenders to amend its FICO credit scoring formula.
The major change is a halt to credit reporting for authorized users.
While some creditors never reported authorized user activity in the first place, others reported this information for years.
The result was that many people with limited or damaged credit history could benefit from the positive influence of seasoned credit accounts.
This was common among family members to help establish a credit history or to help prop up a damaged credit rating.
Many companies began offering to broker arrangements between those who needed additional positive accounts on their credit and those who maintained seasoned accounts in good standing.
For a substantial fee, you could be added as an authorized user on a stranger's account.
Despite the risks involved, many people flocked to these companies to help them gain additional points on their credit score.
These additional points were needed to help them qualify for loans that they otherwise would be denied for.
Some cardholders earned hundreds of dollars a month just by leasing out authorized user status to desperate people looking to shore up their credit score in a short amount of time.
By May 2007, the outrage of lenders that had been burned on an increasing number of defaults and foreclosures forced a change.
The influence of authorized users was eliminated through staggered changes that eliminated authorized user reporting at all three credit bureaus by September 2008.
Although the rewards were high for prospective homeowners looking to gain a last minute boost to their score, the risks were also high.
Many people suffered by being associated with a stranger's account that had experienced late payments or other negative reports.
In addition, both the buyer and seller of authorized user accounts exposed themselves to possible identity theft and abuse by turning over their personal information to these companies that brokered the transactions.
In the end, authorized users would no longer receive credit for account history.
Instead, they would have to rely on their ability to establish credit and to maintain their creditworthiness.
Source...