Authorized Users Reported Without Piggybacking
December 30th, 2008 by Kenneth Long
Fair Isaac shocked many consumers when it stated that it was removing all authorized user information from credit scoring to combat piggybacking. Now they have given in somewhat, although piggybacking on a stranger’s credit line is expected to be disallowed.
Fair Isaac’s sweeping changes to credit scoring models have been delayed several times. Now, it appears these changes known as FICO 08 will be rolled out in 2009.
TransUnion will be the first to modify their credit scores to include the FICO 08 changes. This will occur by the end of January. Equifax expects to implement FICO 08 into its scoring models later in the spring. Experian has not released when it intends to implement FICO 08.
How Piggybacking Works
One of the key features of FICO 08 that lenders demanded was that consumers with thin credit or bad credit should not be able to falsely improve their credit scores by piggybacking on another person’s good credit. This practice peaked in 2006 and 2007 as companies scrambled to broker deals between those seeking to lease out their good credit and those trying to get a few extra points to get their mortgage loans approved.
In essence, a complete stranger could be listed as an authorized user on your account and benefit from your excellent payment history on the account. That person would not actually receive access to the card account so there was no real danger to the primary account holder. Such an arrangement often resulted in several points being added to a person’s credit score. In some cases up to 100 extra points were added to their credit scores.
Authorized User Compromise
The compromise reached between Fair Isaac, credit bureaus, lenders and consumer groups is that bona fide authorized user accounts could help a person with a thin credit file begin to build credit. This would allow for a parent or spouse to help their loved ones establish credit so that they could be better prepared for a future vehicle or home purchase.
It is unclear how Fair Isaac is going to be able to allow only true authorized user data to be included while excluding artificial authorized user situations created through piggybacking. What is clear is that there will likely be some loopholes that piggybackers will still be able to exploit. As such, it is unlikely that companies that help broker piggybacking deals will be shut out entirely. If anything, the prices may go up as the process becomes more difficult!
This entry was posted on Tuesday, December 30th, 2008 at 10:27 am and is filed under Credit Scores. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
March 21st, 2009 at 1:42 pm
How long does the piggybacking take to show up on the AU credit report.
March 23rd, 2009 at 8:49 am
Card issuers that report authorized users typically do so within 30 days of the addition of that user.
Credit bureaus then have the final word on whether that authorized user benefits from the line of credit on their credit reports. This depends on the credit scoring formula they are using (Note that FICO 08 was not fully embraced by the credit bureaus).
August 30th, 2009 at 11:46 am
Me and my Boyfriend want to get a house but he doesn’t have credit and he has really good income….and I have good Credit but i have really low income. What can we do? Is there a way to add my credit and his income?
August 30th, 2009 at 6:16 pm
Dear Arely:
As long as you have good credit and he has none, then you will be in good shape when combining your incomes. You should not have to jump through hoops such as assigning him as an authorized user on one of your accounts. You can do it to help him establish some credit, but the important matter is that there is no bad credit.