Credit and Bankruptcy News: Fair Isaac Eliminates Benefit of "Authorized User" Status
It may seem like your credit score is everywhere these days.
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More and more of your financial transactions are being reported to credit bureaus (including unpaid parking tickets, overdue library fines, utility bill payments, red light camera violations and more), and any credit action (including getting new loans, qualifying for credit cards and taking out mortgages) is affected by your credit score.
Plus, there's the constant threat of identity theft: you can hardly open a magazine or turn on the television without getting a reminder to check your free credit report every year to make sure the information's correct and up-to-date.
And it's true that credit score plays a major role in the lives of modern Americans. As credit reports and credit scores become more powerful and popular, people are figuring out ways to manipulate them to portray inaccurate-and sometimes even fraudulent-information.
But the Fair Isaac Corporation, the company responsible for the widely-used FICO credit scores, has announced that manipulating your credit score will get a little harder with the introduction of the latest version of its credit scoring tool, FICO 08.
Previously, status as an "authorized user" of a well-established credit card account could boost a person's credit score. The practice of adding authorized users began within families: parents would add children's names to one of their credit accounts so that child would have a decent credit history when applying for first credit cards or loans.
But recently, companies popped up offering to let consumers basically buy good credit. This practice is known as "piggybacking"-paying a fee to be added as an authorized user of an account with a strong credit history.
In piggybacking schemes, credit users with untarnished histories would accept monetary payments to add authorized users to their accounts. Because they never released the account's information, they stood no risk of ruining their credit. And people with spotty credit histories had a way to buy good credit almost instantly.
Now, according to a Fair Isaac press release, authorized user status will no longer influence a person's credit score.
The Corporation noted that its job is to provide lenders with an accurate tool for predicting the credit risk of any borrower, and it must constantly revise its standards to keep pace with innovations in the credit fraud industry.
By eliminating the benefits offered by having authorized user status, Fair Isaac hopes to eliminate the misrepresentations of consumer credit now serving to impede lenders' ability to assess a credit risk. These tighter controls on loans may help people avoid bankruptcy by taking on only loan debt they can manage.