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Authorized Users No Longer Allowed to Piggyback On Credit Cardholders’ Credit Scores

It used to be that authorized users on a credit card account were allowed to "piggyback" on the cardholder's rating. If that cardholder had great credit, the authorized user's credit score got a modest bump as well.

But, according to MSN Money's Liz Pulliam Weston, the so-called credit repair companies have ruined the benefit for the rest of us, thanks to some well-publicized media reports.

As Liz explains in her article, here on MSN's Money Central:

A handful of credit-repair companies figured out how to supercharge the process - and make serious money doing so. They solicited folks with good credit who were willing to rent out the authorized user spots on their credit cards for $100 to $125 a month. The companies then sold the slots to people seeking "instant" credit improvement for as much as $900 each. ... An Associated Press story detailed the story of Alipio Estruch, a 37-year-old real-estate agent who paid $1,800 for three slots that helped boost his score from 550 to 715 in about a month, allowing him to secure a mortgage at a favorable rate. ... So, even though there's no evidence the practice of renting authorized user slots is widespread, Fair Isaac decided to change the leading FICO credit-scoring formula to ignore all references to authorized user accounts.

This change won't happen quickly; it will start in September with one unidentified credit reporting agency (FI won't identify it), and then the other two CRAs will pick it up over the following year. Realize, however, that this will not affect joint debtors, or joint account holders. If you and your husband both took out a loan together for a car purchase, for example, this change will not affect either party's credit rating. But if you're an authorized user on your wife's credit card account, then (theoretically) after this change is implemented fully, your credit rating will no longer get the benefit of her prompt payment - and it will no longer be dinged if she falls behind.

http://scbankruptcyblog.com/2007/06/27/authorized-users-no-longer-allowed-to-piggyback-on-credit-cardholders-credit-scores/ Link to Sheryl

Posted by Brian Aber - www.STARTaCSO.com on 07/02/2007 03:31 PM

Comments (13)

credit card, personal finance, authorized user, fico score, tradeline

13 Comments on Authorized Users No Longer Allowed to Piggyback On Credit Cardholders’ Credit Scores

Wow! Timely info, so much for that loophole...

07/02/2007 03:37 PM

by Jason Sardi, Pennsylvania Mortgage Broker (First Choice Equity Group Inc.)

So what are the options to boost someone's score? Seems FTC is all for big business and against the consumer.

Saul

07/02/2007 03:59 PM

by Saul Sanchez

i'm seeing this practice still on craigslist.....buying an authorized user account. i think we will see more and more crackdowns on this and more regulations on loan officers having to really dive deep into borrowers ability to repay.....Colorado's new legislation may go nationwide.

07/02/2007 04:08 PM

by John Barry Seattle Washington Home Loans ( Home Loans)

Good information. I knew this loophole would not last long.

07/02/2007 04:35 PM

by Richard Parr,Realtor,Real Estate Agent, Elmhurst and DuPage County Real Estate (Prospect Equities, Oakbrook Terrace, IL)

Thank you!

I know of a number of people who have their teenage kids as authorized users so that their kids can start off with a good credit rating. Now they were smart enough to keep this a secret from their kids. But it looks like this little boost is comin to an end.

07/02/2007 04:56 PM

by Drew Jelmeland~Home Mortgage, Loan and Accelerated Home Equity (Milestone Financial Group)

Howdy Brian

Congrats on a very good blog post you have done.

07/02/2007 06:34 PM

by Dale Baker, Home Inspectior- in NH & VT (Baker Home Inspections and Consulting Service)

John,

I'm guessing some companies will still offer this even though it is a terminal practice.

Brian

07/05/2007 06:14 PM

by Brian Aber - www.STARTaCSO.com (HTDI Financial )

GREAT INFORMATION BRIAN !!!!!!!

Chris

07/06/2007 12:03 PM

by Chris Sampl

Brian,

Based on discussion triggered by William Johnson, and your contributions to this discussion, I would like to invite you to the followig discussion:

Is it OK for real estate agents to coach their clients on how to improve FICO score

I am very interested in your opinion.

07/08/2007 05:02 AM

by Cimpler Real Estate, Inc.

Thanks Artur,

Great post.

Brian

07/10/2007 04:43 PM

by Brian Aber - www.STARTaCSO.com (HTDI Financial )

Thanks Brian.

07/10/2007 05:08 PM

by Cimpler Real Estate, Inc.

Thank you very much for sharing, that is good information.

07/11/2007 02:11 AM

by Shane Sarae, Senior Mortgage Planner (Loan Network LLC)

HTDI Financial was started with the idea that consumers should be able to do something about inaccurate, derogatory items on their credit reports. Since its inception, HTDI Financial has been helping remove these derogatory items by challenging credit reporting companies and the methods they use to tarnish the credit for so many hard working people.