No More “Piggybacking” as Authorized User
Authorized users can no longer build their credit history…
The company behind FICO credit scores, WSJ Fair Issac Corp., said that it will close the authorized user loophole in its credit scoring model to protect against “piggybacking,” also known as “fast track.” Consumers that are authorized on someone else’s credit card will no longer benefit from the card’s history on their credit score. Unfortunately, the value of being an authorized user on a credit card is now totally lost.
With the high stakes that credit scores have on loans and mortgages, it should come as no surprise that a way was found to boost people’s credit scores quickly and easily. Credit scores are the defining factor in determining whether or not you’ll be approved for a credit card or loan (of any type). Taking advantage of the authorized user loophole, consumers with little or no credit history - like college students - were added to their parents’ credit card account as an authorized user to begin establishing their credit.
Several companies even paid consumers with high credit scores to allow low scorers to be authorized users on their accounts (InstantCreditBuilders.com, Seasonedtrades.com, etc.). The consumer with good credit is paid several hundred dollars to “rent” their credit score out to the low score consumer with the agency taking a cut. The services charge customers $1,000 to $3,000 with the promise to boost scores by as much as 200 points.
Up until now, the practice was accepted because people weren’t taking advantage of the system. But after Fair Isaac discovered companies were profiting from selling the right to become an authorized user on complete strangers’ accounts, they decided it was time to close the “piggybacking” loophole, according to Ron Totaro, Vice President of Global Scoring Solutions at the Minneapolis-based company. Fair Isaac estimates that roughly 1% of consumers will be affected by the change.
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