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FICO score to bar using another's credit rating

The Baltimore Sun

DALLAS -- Credit bureaus are expected to adopt a new version of the widely used FICO credit score this year that will no longer benefit so-called "authorized users" on another person's credit card account.

It's common for parents to add a child as an authorized user on their credit card to boost the child's credit score. That benefit would no longer exist under a new scoring model by Fair Isaac Corp., the company that developed the FICO score.

You can still be an authorized user, but Fair Isaac will no longer factor authorized-user accounts into its credit-scoring formulas.

The move is in response to the controversial practice of "piggybacking," in which some Web sites allow consumers with poor credit scores to hitch on to someone else's good credit record.

These companies say they can boost your credit score by having you added as an authorized user on the credit cards of strangers with stellar credit, for a fee. This raises your credit score.

The strangers get paid based on the quality of their credit, with the promise that the new authorized users won't actually be able to buy anything on their cards or even get any of their personal information.

Lenders and Fair Isaac officials decry the practice, saying it damages the integrity of credit scores.

"We will do whatever it takes to protect the reliability and accuracy of FICO credit scores for lenders, and to ensure lenders can continue to use FICO scores with confidence when making their most important customer decisions," announced Fair Isaac CEO Mark Greene in June.

"We will continue working with lenders, regulators and others in the credit reporting industry to end deceptive practices that fraudulently misrepresent consumer credit histories for profit."

He made the announcement a month after Fair Isaac said it was updating its FICO scoring model that will "significantly enhance its predictive power."

Called FICO 08, the new formula also will be more forgiving of occasional slips by consumers but will take a harder line on those who repeatedly are late on their bills. The FICO score ranges from 300 to 850.

Here's an example from Craig Watts, Fair Isaac spokesman:

Bill and Tom each have 10 open credit accounts on their individual credit reports.

Bill's report shows that he was seriously delinquent on one account several years ago, but all his other accounts are in good standing, and his credit card accounts show low balances.

Meanwhile, Tom's report shows he has been seriously delinquent four times on different accounts in recent years, although he also has several accounts in good standing.

"In such situations, Fair Isaac's new FICO 08 formula will take away fewer points than the current formula would from Bill's score because of his serious delinquency because statistically, the delinquency is an isolated instance that occurred in the past," Watts said.

"In Tom's case, his recurring delinquencies are statistically an indication of a recurring problem repaying his debts, which will lower his FICO 08 score."

When you get your FICO score from each of the three major credit bureaus, that number has been generated using the Fair Isaac formula and credit information that each bureau has on you.

It's important to check your credit report from TransUnion, Equifax and Experian because each of them may have different information about you, and that means your scores will also be different.

If your information is identical at all three bureaus, your FICO scores should be pretty close.

Lenders may review your score and credit report from any of the three credit bureaus.

TransUnion expects to have the new FICO scoring model "available for customer testing during the second quarter of 2008," said spokesman Steven Katz.

Experian doesn't have a date for adoption of FICO 08, said Rod Griffin, manager of consumer education. "We're working with FICO on the technical issues and on implementation, but we don't yet know what the date will be," he said.

Watts said lenders should begin using these new FICO scores by spring.

"That's our expectation anyway," he said. "Whether that's true or not, it's up to the credit bureau because they're the ones which have to install the formula in their system, so they can use it to generate the FICO scores."

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