It has often been said: You live and die by your FICO Score. Well, it's getting ready to change. The authorized user is only one of several ways Fair Isacc is recalculating. Only another indication that the subprime mortgage crisis is spreading quickly into the credit markets. (sorry if this has been posted previously, but I couldn't find it)
How will this affect the average consumer.. how will this affect you?
http://www.credit.com/credit_information/credit_report/Consumer-Alert-FICO-Formula-Changes.jspConsumer Alert:
FICO Scores Dropping Authorized User Accounts
by John Ulzheimer and Emily Davidson for Credit.com
A major change to the FICO® credit score formula was announced by Fair Isaac Corporation earlier this week. FICO scores will no longer factor authorized user accounts into their credit scoring formulas.
Consumers who are listed as authorized users on credit card accounts will likely see a significant change in their credit scores when this modification takes place later this summer.
For most consumers, this change will have a negative impact on their credit scores. Only consumers who are listed as an authorized user on negative accounts or accounts that have balances that are close to the credit limit will possibly see an increase in their credit scores.
Adding a family member or friend as an authorized user on an existing credit card account has long been used as a way to establish credit. Many parents added their children as authorized users in order to help them build their credit history.
However, credit repair organizations have also started using this system as a way to fraudulently sell authorized user account access to consumers with credit problems. This credit repair loophole was part of the motivation for the FICO score change.
What this means to you:
Once this change goes into effect you will no longer get any value out of being an authorized user on someone else’s credit card.
It is quite possible that your credit scores could go down, significantly, because of this change.
If you have paid to have your name added to someone else’s credit card as an authorized user it is possible that you are guilty of defrauding lenders. It would be in your best interest to have your name removed as soon as possible and stop doing business with these companies as they are violating federal and state laws.
If you have been paid by a company to rent out your credit card accounts then you may be guilty of enabling credit fraud. It would be in your best interest to stop the presses.
If you are getting married soon and were planning on closing your credit card accounts because you were going to be added as an authorized user on your spouse’s credit cards it is a good idea to rethink that move.
If you are married and do not have any credit cards where you are the primary cardholder or a joint cardholder, you may want to open one or two in your name.
Women will be disproportionately impacted (negatively) than men because more times than not, it’s the women who are added as an authorized user.
Those of you who are new to this country or are a young person trying to establish credit (or re-establish credit), you may have to depend on secured credit cards or other non-prime credit products to establish credit.
<snip> more at link
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