The Mortgage Industry scored a victory with Fair Isaac's announcement of their modification of their FICO scoring formula starting in September 2007. They've named it FICO 08.

As we posted on our Salt Lake City Real Estate Fraud Report, one of the latest fraud schemes in the mortgage industry was for borrowers with low scores to rent or piggy-back on borrowers with excellent credit. All Mr. Poor Credit would have to do is get Mr. Perfect Credit to add him to one of his credit card accounts as an "authorized user". Within weeks Mr. Poor Credit could see a jump in his score of up to 200 points and could easily qualify for a home mortgage he should not be able to get. This began to be a lucrative business for some cons charging over $1,000 per line of credit added to your credit score.

Fair Isaac Changing FICO Calculation

All this will likely come to a halt with the programming change FICO is making. The change will simply eliminate "authorized users" from any FICO score calculations. The announcement also stated the new FICO 08 will "deliver increased predictive power without considering authorized user accounts". It sounds to me like they could be making additional changes but they don't share what those may be.

Lenders see the change as a great move to help them screen borrowers that should not be borrowing. But, is there a down-side? There usually is. The "authorized user" designation on any charge account was typically used by children of the account owner. It was used as away to build their children credit and help them establish their own history and FICO score. The scoring change will remove that option for parents.

Parents still have the option of adding their children as a "joint account" holder. But we all know the risks of giving our kids full use of our credit cards!

To see what you can do legitimately to build a decent FICO score visit http://www.myfico.com/ or http://www.fairisaac.com/fic/en.