Good article on "buying" AU statuses: Note "UPDATE" from FICO: will not consider AUs in new model to be released! http://credit.about.com/b/a/000045.htm
That is not cool. For every parent trying to help their child build good credit from day one- that is no longer going to work.
Not really true, since the parent can now open a new account as a co-signor with their child. Sure, the child won't get an artificially long history, but then again, I think we've all seen that it really just takes 2 years or so, barring negative items, to build good credit history. For me the problem is more that the loophole is closed for other family members to help out, as in my case. Yeah, I've made my mistakes in the past, but I've taken care of all but one of them. And other than a 1-yr old CO, the only negative I have that is my own fault and less than 4 years old is one 30 day late (the account went 32 days late and Cap1, so far, won't budge on the 2 days beyond the cutoff). My big problem is that when I got in to a little trouble (not more than 60 days late) 4 years ago, I unknowingly closed all of my accounts as I paid them off. So now my score is well below that of people with 18 month old bankruptcies who knew what they were doing and kept one or two accounts in good standing through the bankruptcy since I have no account older than 15 months. And it's going to take me 1-2 years to see 700 now. So, for the injustices of this ridiculous system, I don't like that any loopholes are being closed. How good can a system be when it doesn't factor in things going on in people's lives that may no longer be a factor? Shouldn't your score bounce up as quickly as it dropped if you fall behind on bills to help care for a sick parent who eventually passes once you get caught back up? Seriously, 3 months of bad history to sink like a stone followed by 12 times as long to bounce back, even if you've fully caught up by the end of the 4th month. It's only a matter of time until someone figures out a new loophole, and I hope to take advantage of it when they do.
Well, take what Fair Issac says with a grain of salt. I will be surprised if this new system is actually implemented to begin with and more surprised if it sticks. In the time being, I would do all I could before the faucet is shut off. That is too say, I cannot see Fair Issac updating and/or increasing a consumers FICO before the "new" system only to reduce it if and when the change is effected. Again, I would be surprised if this all comes to pass . . .
It also comes from someone who has litigated against the credit reporting agencies and Fair Issac themselves. To say my opinion is an educated one would be an understatement. Again, this will not move forward as announced if for no other reason than the ECOA precludes it at least by implication. It would be an absolute windfall for consumer attorney's nationwide if it were to be implemented.
Perhaps you will read it from a uninterested party(no business ties).This new version of Fico is a direct conflict with the Equal Credit Opportunity Act.It will be litigated if it goes into effect.
However, the way around this "legal" aspect may be the business one, that lenders will utilize their own versions of the scoring models to deliniate truer credit histories. Obviously, this issue has touched our nerves acutely. The selling of seasoned tradelines, through the AU mode, is not illegal. But the "use" of them through raising a credit score, and presenting it to a lender, does border on false circumstances. The question is, what does this practice do to the majority? Although it is an astronomical number for the dollar value of credit in the economy, it is still a finite number. In this tightening credit market for mortgages, are there folks who are being denied due to "higher scores" displacing them? Will these "purchased higher scores" skew the default rate for credit scores? Will defaults increase due to this practice? What will be the cost? To take it back to basics, the entire credit reporting and scoring industry, as well as the government, and industrial and consumer groups all seek basically the same thing: fair and accurate reporting, to ensure as true a picture of default risk as possible to the users of this data. In our heart of hearts, do we feel the purchasing of seasoned tradelines forwards the pursuit of fair and accurate reporting? Each individual must answer that for themselves. I beleive Fair Issacs will try to bring out a modified algorithm to weed out these purchased AU tradelines. I beleive that FICO will try to include the legitimate AU tradelines as well, and the difficulty will be in identifying the difference. It would not be that difficult for the FICO algorithm to quantify "sub groups" of data which do not correlate. If a report shows two or three AU accounts with substantial aging, and one or two with short history, as well as negatives, it could easily identify "flags" in the data. Though we may debate, argue and mystify about the FICO scoring model, I maintain that it still pursues the thesis of fair and accurate reporting. My personal take is that the reporting industry will begin "double checks" on AU accounts. Per the purchased tradeline process, once the account reports, it is then pulled. So, about a 30 day window. Legitimate AUs will remain on reports for much longer. So, it would seem the answer would be to have the reporting agencies look for monthly reporting, and not report after any break in reporting. In the end, it is still not illegal to purchase credit history, and I give credit to those business people who leveraged this demand and opportunity. Like any "opportunity", those in the initial wave of it gain, those on the end lose. However, if you truly pursue the thesis of "fair and accurate reporting", then you cannot agree with this prctice, and I hope that the legitimate AUs do not get hurt because of this new market.
