Monday, June 18, 2007

Fair Isaac to put a stop on “credit score borrowing”

A credit score scheme that emerged recently allowed consumers to boost their credit scores in as little as several weeks by being added – for a pay – as an authorized user on someone else’s credit card with a long history of perfect payments. Parents often add their children as authorized users on their credit cards, in order to help them establish credit and improve their scores. Adding strangers as authorized users, however, is considered a scheme, even though no regulation currently defines who can be added and the maximum number of authorized users on a credit card.

Businesses that offer the service actually help borrowers manipulate the credit scoring system and get better terms on any loans they apply for. Some borrowers wouldn’t be able to get loans if they didn’t get a “credit boost”, which is why banks are increasingly concerned about the practice. Fair Isaac, the company which created the FICO scoring system is working to modify the score. As of September, the cardholder’s credit will not be transferred to authorized users, which will essentially stop the scheme, but will also harm law-abiding borrowers who wish to help their children establish good credit.

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