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FICO 08 -- Authorized Users

Thursday, August 14, 2008

FICO 08 - Trans Union Authorized User account apparently NOT ignored

Funny how it goes, is ANYTHING Fair Isaac says ever true?

I have a client with a very thin file, only two unrated student loans on TU and a few collections (reported as such.)

FINALLY an AU account was reported and according to the score factors, the account history for the AU account was rated.

You have a short credit history

Your oldest account was opened 2 years ago.
Average age of your accounts 1 years

WITHOUT the AU account:

You have a short credit history

Your oldest account was opened 9 Months ago.
Average age of your accounts 9 Months

The student loans still counted for the history although reported as “unrated or bankruptcy”.

Those very thin files are extremely helpful with determining what goes into the FICO scores.

I suppose the AU account won’t be rated for the B/L ratio, we’ll hopefully see that once we have a balance, it’s $0 right now.

There is some strangeness with the other factors too and hopefully I’ll have time to post more about that soon.  I’d like to start a new blog just on FICO scores, I see so many interesting factors, but here the posts get lost.  I need more space, categories, and a few more hours in my day.

Sunday, June 01, 2008

Suing Fair Isaac

A CreditFactors subscriber has been asking about disputing the information on the myFICO reports with Fair Isaac, suing Fair Isaac and causes of action.  Since often readers ask about litigation regarding Fair Isaac, I thought I’d share my posting:

Give me $100,000 and I’ll sue Fair Isaac and CRAs for all kinds of violations. About $90,000 will go to depositions of Fair Isaac and the CRAs and the rest goes to pay for legal research, filing fees etc. and I’ll pay myself $5/hr for my work on it.

If you want to argue that they produce their own reports, sure, give it a try. But don’t waste your time if you don’t have the money. There is a reason why I’m giving up ...

“"They" is in reference to myFico.”

There is no law preventing you from disputing with them. But I really can’t afford to spend 20 hours on researching the basic issue right now, there’s been quite a bit of litigation and then the changes with the FACT Act. But if anyone is willing to pay for it, I’ll do it. $5/hr + research fees and I’ll post it all for the enjoyment of all who want to read it.

If you’re really into these issues, get a PACER account and subscribe to fastcase.com (24 hours free) and be prepared to spend a few thousand hours reading. Try it and you’ll see what you get out of it.

So that’s my recommendation to all of you who think that there’s a problem with credit reporting and scoring.  Plan on spending many thousands of hours on research and filings and at minimum $100,000 on litigation.

As you can see by the whopping $300 in donations I received in May, it won’t be me doing the litigating.

Thursday, May 08, 2008

FICO08 - Cap One and Citi will not convert authorized user to joint account holder

One of my long time clients is an AU on several of his parents’ cards.  Since TU no longer rates AUs, he tried to become a joint account holder.

Both Capital One and Citi declined to add him as JOINT account holder.

WHY would they do that?  There is NO increase in risk and they have ONE MORE person to go after.  I don’t get it.

Does anyone know what’s up with that?

Tuesday, June 05, 2007

Reader mail:  bankruptcy and will AU accounts lower the scores of the account holder?

I am considering your AU services, and I have some questions:

- I have a chapter 7 Bankruptcy that was discharged on my credit report a few months ago. Can someone with a chapter 7 Bankruptcy qualify for your AU services?

To me it makes no difference whether there’s a bankruptcy or whatever other negative reporting.  What counts is whether the AU account will benefit you and if you don’t have any surviving revolving accounts, an established positive AU account with a few years history will definitely help a lot with scores.  But, do you NEED the high scores right now?  Probably not.

However, it is most important that all the discharged accounts are reported CORRECTLY and that’s especially difficult with Trans Union due the date closed being critical for FICO scores (only TU) and a missing or incorrectly Date Closed can easily lower the FICO scores by 50+ scores. 

I have had a number of clients who opened a couple new accounts after they got the credit reporting corrected, followed my other recommendations and within 2 years from the bankruptcy filing their credit scores were over 700.

- Is the credit score of the person offering the AU services affected when someone with a low credit score becomes an AU?

Thanks,
...

The score of the account holder is NOT affected unless the AU uses the account.  Obviously, balances impact on scores and if they aren’t paid and you get lates, you really destroy the scores.

I found that AU accounts are a great way to improve scores in COMBINATION with CORRECT credit reporting and NO new lates or collections.

Fair Isaac to no longer rate Authorized User accounts - NEXT generation of FICO score manipulation

Fair Isaac Combats Credit Manipulation
June 5, 2007 - 12:47am

By J.W. ELPHINSTONE
AP Business Writer

NEW YORK (AP) - Fair Isaac Corp. said Tuesday the next version of its widely used FICO score will no longer consider certain types of credit card accounts, closing a loophole that allowed strangers to coattail on a cardholder’s good credit.

The new FICO score formula won’t include authorized user accounts _ users on credit cards who are not responsible for paying the balances but are approved to make purchases with the cards. Often, authorized users are family members of a cardholder, such as college students on their parents’ cards or spouses who have little or no credit of their own.

These types of accounts can improve a credit score if the primary cardholder kept low balances and paid the balance on time over a long period.

Fair Isaac plans to introduce the new scoring methodology in September to one of the three major credit reporting agencies: Equifax Inc., Experian Information Solutions Inc. or TransUnion LLC. The other two reporting agencies will receive the update some time in 2008, Fair Isaac said.

The company’s action comes after lenders and industry officials raised concerns over credit renting, a little-known but growing practice that allows people with bad credit to piggyback on strong payment histories of credit card holders.

The person with a low credit score pays a fee to rent a spot as an authorized user on a stranger’s account. The payment for the person allowing the piggybacking on his or her credit history depends on the quality of his or her credit line.

With an augmented score, consumers are able to receive lower interest rates on mortgages, car loans or personal loans. Typically, a higher credit score translates into a lower interest rate on a loan. Although federal authorities have yet to rule on the legality of the practice, lenders worry that if it becomes commonplace, they may unknowingly take on riskier borrowers.

For Fair Isaac, changing its score meant protecting the integrity of its credit scoring system. Ninety percent of the largest U.S. banks base their loan decisions on FICO scores, according to the company.

“We will do whatever it takes to protect the reliability and accuracy of FICO credit scores for lenders, and ensure lenders can continue to use FICO scores with confidence when making their most important customer decisions,” said Fair Isaac Chief Executive Dr. Mark Greene.

Fair Isaac said that the new scoring formula will better predict consumer payment behavior and will require minimal changes to lenders’ operating systems. The FICO score will retain the same scoring range _ 300 to 850.

But those college students and spouses who rely on authorized user accounts to build their credit stand to lose that benefit.

Tom Quinn, Fair Isaac’s vice president of scoring solutions, said it was to challenge to find a solution addressing the credit borrowing problem because there was no way to distinguish between family members and strangers due to privacy laws and the Fair Credit Reporting Act.

(Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)

Just a few days ago I added Authorized User accounts to my services because some of my clients kept looking into purchasing AU accounts from companies who didn’t appear to be very reputable. 

One of my clients had alerted me to Credit score scheme raises fraud worries

… Asked for comment on the rental of trade lines to artificially inflate mortgage applicants’ FICO scores, Steven Baker, Midwest director for the Federal Trade Commission, would say only: “We are aware of it. We are concerned about it, and we are looking into it.”

Donald Girard, spokesman for Experian, one of the three national credit repositories, said “these are nothing more than new credit repair scams.” However, he added, Experian “does support authorized user relationships such as … parents helping a son or daughter establish credit with their first credit card.”

Fair Isaac Corp., developer of the FICO score, said that the “inappropriate use” of trade lines is an industrywide issue, and that the company is in discussions with the FTC.

Isn’t it astounding how concerned they all are when consumers INCREASE their scores, but they do NOTHING about the artificially LOW credit scores due to Capital One’s refusal to report the credit limits?

Nothing could document better that Fair Isaac and the regulators WANT consumers to have the lowest scores possible so that they are forced into unconscionable subprime loans.

Anything to assist the banksters with the exploitation of the working people!

As I started looking into the AU accounts for sale, I noticed that no charge accounts are offered.  That’s because Authorized Users can USE charge accounts to place phone or online orders and probably even in stores as soon as they get the account number from the credit report.  Unlike with credit cards, no expiration date or the 3 digit number is required.

So, I’m already ahead of the game.

I might just make a few select clients JOINT account holders for some low limit cards.  Obviously, it will cost MUCH MORE than becoming an AU because the risk is much greater that my account will be used and once it HAS been used, I have to close it.  And of course I have to pay the balance that’s owed.  It’s going to be a lot more risk and a lot more work to monitor the accounts.

I’d HATE to lose an account opened 15 years ago.

But, in the spirit of documenting that FICO scores are inherently corrupt, I decided to offer these services.  And this may well become a nice supplemental income to senior citizens on a fixed income.  They are most likely to not be hurt too much when an old account has to be closed.  Preferably they do not add a joint account holder to at least one old account.  It’s risky, but beats selling a kidney.

I also found it very interesting that Fair Isaac and Experian stated that children SHOULD be able to reap the benefits of being AUs on their parents’ accounts, but apparently it’s wrong when people buy these accounts.  That’s of course contrary to everything I believe in, as I’m very much into equal opportunities.  Just because a kid’s parents are well to do he deserves higher FICO scores and to pay less interest, rent, insurance, etc.?

Of course the wealthy will always have unfair advantages, but why shouldn’t the disadvantaged at least be able to purchase those same benefits?

Many kids will now be added as joint account holders, many parents’ credit will eventually be ruined by their kids.  And many of the consumers who weren’t born into wealthy families, orphans and otherwise disadvantaged will hand over more of their cash to the corporations and have fewer opportunities.