Previously, consumers with poor credit scores could get themselves added as an authorized user on the credit card account of someone with a good credit score and receive a credit score boost, a practice that, "...is clearly loan fraud," Craig Watts, the public affairs manager for Fair Isaac, which sells the FICO score, told the Washington Post.
]]> Fair Issac says the change will come about as part of the updated FICO 08 score to debut in September, but an industry source says they're already seeing the credit scores of authorized users beginning to broadly drop.Credit scores are used to decide whether people get loans. People inflating their scores, and Fair Issac's failure to deal with it, has lead to criticism of the company for contributing to the subprime mortgage meltdown.
However, John Ulzheimer, president of Credit.com, a consumer credit website, tells the Detroit Free Press,
...it will also hurt legitimate authorized users, mainly young adults and married women, who have used the strategy to build a solid credit history. These consumers could end up paying more for everything from car loans to credit cards.If you're married and listed as an authorized user on a spouse's account, consider converting it to a joint to avoid a credit score ding.
Changes coming to credit scoring may hamper authorized users [St. Louis Post Dispatch]
Shortcut to good credit will end [Detroit Free Press]
(Photo: Getty)
Because that is just as much of an illegitimate boost in your score as if you didn't know each other. The point of FICO's little system is to assess the riskiness of a potential borrower. Your parents' or spouse's spending habits say nothing of your own. Besides, that is assuming that those family members are legitimate authorized users and not fraudulent ones like those described.
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It would not take a "rocket scientist" to figure out how to get the "scam piggy backers" off of the accounts.
This is just going to make it more difficult for the "good kids" to establish credit and when they can get credit it will be at highly inflated rates!
The banks, credit card companies, and credit reporting agencies colluded and fostered the "scam piggy backers" and are getting "bit" by their own stupidness. That is no excuse to abolish the original intent and benefit of authorized users.
Financial World heal thyself and quit screwing with the honest hardworking folk!
I noticed my credit score went down- I bet this is why.
]]>So I have an AmEx charge card in my name... I got my girlfriend a card (yes i used her SSN) with her name on it on my account to help give her some credit history.
Is this going to affect her credit?
]]>One aspect of this just screams for a civil rights case since the majority of the legit people being damaged would be women who don't work and have authorized user status on their spouses accounts.
]]>edit: "loan fraud." not "load fraud." yeesh.
]]>@SBR249: I don't understand either. At least if it is joint, they can be held liable for debt. Piggybacking does not create any liability for those doing it.
]]>@SBR249:
It is a risky move. But it's not always a bad idea. My fiance has excellent credit; when I met him, I had virtually none at all. After we were together about a year, he added me to one of his cards so I could get started building my score. We didn't fly into it blindly, and I take the responsibility seriously. I am actually the one who makes all the payments on the card, though it's in both our names, as a little trade-off to him (he has 2 other credit cards of his own, so he's definitely not getting off scot-free).
It's too bad that they're looking at this practice as "load fraud," because I don't think that's why many people do it.
I wonder why the FICO folks can't continue to take into consideration the authorized users who are children of the credit card holder or the spouse of the credit card holder. I can understand wanting to shut down the stranger piggy-backing on someone else's credit.
]]>@full.tang.halo: I agree. My fiance and I both received credit cards from our parents to use in case of emergency. Both of our credit scores benefitted greatly from this.
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