Here is an interesting article by bankrate.com about the authorized user situation and how scoring models have now changed. http://www.shrinkmylink.com/afsoson
Direct link to article: http://www.bankrate.com/nltrack/news/DrDon/20071030_authorized_users_score_a1.asp
I like 'Doctor Don's" feelings on the ECOA but, otherwise he is just wrong. Here are some inaccurate statements and further falsehoods being perpetuated: "The credit reporting agencies are moving away from including any payment history of authorized users in calculating a credit score." False. Credit reporting agencies report anything that a furnisher of information provides unless it is a result of identity theft. They are not going to change this practice because Fair Isaac developed a new illegal scoring model. More practically, AU accounts still reflect the payment histories and are being calculated into scores. This is evident insofar as all of our clients experience score increases on each and every reporting agency. "Fair Isaac Corp., the company responsible for FICO credit scores, modified its credit scoring system in September and no longer includes the payment history of authorized users." False. They allegedly came out with a "new" scoring model, FICO 08'. The other models are still avaliable and vendors such as Kroll, Factual Data, and First American Credco use them now. Moreover, there has been no change in anything as of September or even now. It works as it always has. "Other credit score providers will follow suit over the next year. The payment history of authorized users won't be dropped from credit reports, but the information won't be used in calculating credit scores." Huh? Where's any evidence to back this up and what score providers is he referencing? You think the makers of the Vantage score, who are now in litigation against Fair Isaac, are going to implement a model that will depress approvals . . . no. In addition, didn't this guy just say that histories would be removed from the credit reports two sentences earlier? Even assuming that they were, what about the boost from available credit and the date that the account was opened? "I believe the change in the credit scoring model goes against the intent of the Equal Credit Opportunity Act of 1974. This law required credit providers to include the payment history of cards on the credit report of spouses who were authorized to use those cards." False. The change is illegal pursuant to the express language of the law. In pertinant part, the ECOA provides: (6) Credit history. To the extent that a creditor considers credit history in evaluating the creditworthiness of similarly qualified applicants for a similar type and amount of credit, in evaluating an applicant's creditworthiness a creditor shall consider: (i) The credit history, when available, of accounts designated as accounts that the applicant and the applicant's spouse are permitted to use . . . It is not just the "spouse." It also applies to the applicant. In other words, anyone producing or using a scoring model which disregards accounts which the "applicant" is permitted to use; i.e. an authorized user account, is in violation. "Now, even though the payment history is still reported, it will no longer be used to calculate a credit score." WTF? Is it there, going to be there or not? This guy has contradicted himself twice now. Still, assuming arguendo that the payment histories are removed, and they won't be, that does not effect any infusion of available credit or overall history. Therefore, there would still be an effect. "The credit scoring firms were faced with a difficult situation when piggyback providers started arranging for people to temporarily become authorized users on strangers' accounts with the idea of improving their credit score. If a credit score loses its predictive powers then it becomes ineffective in the credit approval process." You know, I suppose this is technically right. However, the whole piggyback thing is so far overblown that it is utterly ridiculous. How many people even know of this much less engage in it. The more important point to be made here is the two-sided perception of this practive. One on hand, if you pay for such a service, you're misrepresenting yourself and should be put in jail. The FTC has already said its legal but, I digress. However, if Mom or Dad adds you, great, you just established a good score for the future. It makes no difference if someone pays for the service or not. In both contexts, the score is raised whether you consider it ethical or not. Finally, I will say this. There is no evidence whatsoever that this change has been implemented. To the contrary, it still works. All we are going on is what one company says that they are going to do. What they suggest is illegal and even internet authors have realized that it is illegal (although, they can't interpret the law). If this does happen, it will put a whole new meaning on the words "class litigation."
Well, from my experience, I can't say that these statements are false, they seem true to me. Then again, I'm buying the scores directly from myFICO, I'm going to call my mortgage broker right now and have him pull the scores through Kroll. Maybe myFICO only reflects the newest FICO '08 model...
Gmanfsu: Just out of curosity, are there any derogatory items on your credit reports? All I can say, is that our clients are still reaping the benefits and I will project that they will continue to. Even assuming that this FICO 08' proclaimation comes to pass, two credit reporting agencies will not even review it until some point in 2008. That is from Fair Isaac's statement in June and we all know that everything in the media is absolutely true . . . My point is that there is an exception to every rule. Unfortunately, it may be the case that you are the exception. Just a thought. I do hope your broker pulls higher scores.
I recently purchased a seasoned tradeline and it helped increase my scores across the board. I have been monitoring my scores so I know the impact is from the new tradeline. The increase wasn't as much as I was hoping for but it is an improvement nonetheless.
BTW, I should note that after one week of the tradeline posting, there has been no change to my scores on truecredit but I have observed increases to my fico scores.
Yes, all have a 30 day late back in January, TU has a $2k CO, EX has the CO and 2 paid collections, and EQ has 1 paid collection. Other than that, nothing derogatory in last 4 years. My mortgage broker just pulled the exact same scores as myFICO scores from my signature. Each one exactly the same. For the mortgage purpose, I don't think it matters all that much. He got me a rate that's only 25 basis points (0.25%) higher than what he's getting for people with 800 range scores. Plus, I can buy the rate down to that lower rate for only $2500 added to the mortgage. I'm rolling my closing costs in to my mortgage and paying about $100/month in PMI. The buy down will lower my payment by ~$25/month, but since we're planning on flipping the house in about 5 years, I don't think I want to add $2500 to the face to save $25/month. That $2500 will still be $2400 or so in 5 years. We're doing a 30-year fixed, no prepayment penalties, so we can refi at any time, as long as we don't have negative amortization. So I think the only thing that my scores are doing as far as limiting me in the mortgage is limiting me from choosing an 80/20 to avoid the PMI. But with the time frame I'm looking at, and only $100/month in PMI, I don't think the 80/20 would save me much money and might make my monthly payments too high. Tough to tell since I didn't qualify for one, so I can't see a Good Faith estimate on what I would qualify for. Anyway, the only other thing I can think is that maybe since the TL just showed up a few days ago, it's not impacting the scores. Maybe I need it on my report for a full month. Because even though I'm being dragged down by some derogatories, my scores should still have gone up at least 25 points by adding a 20+ year old account with a $22k credit line with a utilization of only 0.96%!
I had my girlfriend add me as an AU on her BOA credit card. She has a flawless history and an $18,500 credit limit, with a balance of $0.00. If Truecredit would let me back in, I would be able to see if its made a difference or not. After fighting with Transunion, and they let me back in- I will post on how much of a difference it has made- if any.
I agree . . . Just a few questions though if you don't mind. Does the account show on your reports as opened 20 years ago? Does it show a "credit limit?" I'm just trying to get my head around why this isn't panning out for you. It could be a delay in the scores but, FICO is usually instant from the data we've gathered. True Credit on the other hand, not so.
The "rub" in the ECOA.. The "rub" with the "new FICO" model, excluding AU accounts is in the language below: "(i) The credit history, when available, of accounts designated as accounts that the applicant and the applicant's spouse are permitted to use . . . " A "purchased tradeline" is one that does NOT permit use, hence is not indicative of the report holder's history. The purchaser never receives the card, and is taken off the account once the tradeline is posted on credit reports. Hence, not including the "purchased AU account" does not violate this section of the Act (in spirit). So..how does a scoring model decide? The answer is that it "throws the baby out with the bathwater". Any legal action resulting out of this will be touchy, a "credit decision" is supposed to be based upon a review of the credit report, not just the score. We may know that to be a different case, but there are just too many holes for any legal action to stick.
Biz, With all due respect, your theory for the potential of these types of cases is misplaced. You certainly aren't naive enough to believe that someone who purchases a tradeline would file a civil action under these auspices. You're just not thinking about this inevitable litigation in the right context. What will happen should FICO 08' ever to come to pass, which it won't in my opinion, is that some female applicant is going to bring forth such a case. They are going to have good credit and when or if FICO 08' hits, its going to reduce them to no score insofar as they will have only AU's present on their reports. They will need credit for something after the proposed change and they will not be able to get it. It will begin as an individual action but, somewhere, sometime, some consumer attorney is going to certify a class. It won't be hard and it won't take long insofar as this can and will effect millions of people if it happens. Then . . . Fair Isaac (if they still are viable after the soon forthcoming holding in their "Vantage Score" case is rendered) will "throw the baby out with the bathwater." This time, however, it will be to avoid further litigation and AU's will be calculated, even purchased ones. The reason will be because, as you said, you can't tell which are purchased and therefore, which users are truly permitted to use them. I am sorry but, the holes are present for Fair Isaac, not the consumer, insofar as they are they ones violating the express language of the law. When a statute is clear and unambigious, it must be given its plain meaning. This statute is clear and thus, Fair Isaac would lose in front of either a bench or jury. This is why the big September date never happened . . . in my honest opinion.
BANK OF AMERICA More about this account >> Account No.: 058* 058* 058* Condition: Open Open Open Balance: $216 $216 $216 Type: Credit Card Credit Card Credit Card Pay Status: Current Current Current Two Year Payment History: Legend >> (Shows all OK's) And under the Details: TransUnion Experian Equifax Past Due: $0 High Balance: $2515 $2515 Terms: Limit: $22600 $22600 $22600 Payment: $15 $15 $15 Opened: 06/23/1986 06/1986 06/1986 Reported: 10/05/2007 10/05/2007 10/2007 Responsibility: Authorized User Authorized User Authorized User Late Payments (last 7 years): TransUnion Experian Equifax days late: 0 0 days late: 0 0 days late: 0 0 I just don't get why this wouldn't have a HUGE impact unless FICO '08 is here... And today's scores were pulled by my mortgage broker through Kroll.
Could be that the derogatories are bringing it down. In other words, they're mitigating the benefit to an extent. I doubt it though. My only thought is that you're right on the cusp of your current FICO Bubble. Some call it a bucket but, whatever they term it, people are grouped together using some fashion of rather ambigious criteria. It could be that the account didn't do enough to break you out of your current bubble. That is the ONLY thing I can imagine. I tell you with 100% certainty though that FICO 08' is not here. For you though, that would at least give you an explanation. Let me ask just a few more questions and I will resign myself to being clueless. How many credit cards do you have? How old are they? What are the balances in porportion to the limits? I know you probably answered this somewhere else but, I am lazy and don't want to search.
I think you're missing the main point - whether I had a 700 score or a 450 score the day before this TL hit my reports, my score should have gone up, no matter what. I had my scores one day, the TL's showed up, and I had the same scores the next day, and since. This TL had NO IMPACT on my scores whatsoever. Whether I only had 6 month old accounts at 100% utilization or I had 10 year old accounts at 15%, an account this old with this utilization should help my scores, especially when you consider that to my knowledge, utilization is not viewed by FICO on an account by account basis, but rather across your entire credit picture - it's total debt divided by your combined credit limits on open accounts.
No, accounts are scored on an individual basis and not only on an overall basis. This is the reason I asked what your current utilization was on your current cards. Moreover, yes, if you have a bunch of accounts less than sixth months, it will naturally lessen your overall and payment history. In other words, they will mitigate the account history of what you were added to. Finally, the higher your scores, the less positive impact an additional tradeline will have no matter the age or credit limit. In any event, I'm only attempting to present a valid reason as to why this tradeline had no impact. Now, the FICO 08' argument is not on the table, not yet anyway, unless they've applied it only to you. There are many variables which may explain this but, I'm not privy to them so I can't even begin to propose what may be happening with respect to your individual file.
gmanfsu, What are the three fico scores your broker pulled? I am curious what it took to get approved for the mortgage you described. Thanks, Brucey
The scores are in my signature. Kroll/Factual Data is pulling exactly what I get from myFICO 2 months in a row. Keep in mind, though, that I'm working with the builder's broker. Maybe they're doing a little extra to get me approved since they're making money on the sale...
