Common Practice
It is a typical practice for parents to give a child a credit card. It’s great for emergencies and handy for everything from summer camp to college life. It is also typical for 1 spouse to make the other spouse an additional card member.
A Little Software Bug
None of these practices are even slightly questionable. Extra card member accounts didn’t attract the attention of lenders or Fair Isaac Corporation, the creator of the credit-scoring model utilized by lenders when they make credit decisions, until they noticed an fascinating bug in the credit-scoring model which was to spawn a questionable little sub-enterprise in the credit repair business.
A Cool Credit Repair Trick
It appears that as soon as the new account appeared on the credit report of the beneficiary their credit score would jump. In other words they had been inheriting the credit history of the card from the donor. In the case where the donor had superb credit the beneficiary discovered their own credit score jumping significantly, frequently over one hundred points, a cool little credit repair trick, but not what Fair Isaac actually had in mind.
Word Spread Rapidly
Well, the word swiftly spread. And as often happens, creative entrepreneurs thought up a way to package this little credit repair miracle and sell it to completely anybody who had the cash and desire to give their credit score a quick, albeit undeserved increase. And it is this undeserved issue that became the real issue.
FICO in our Life
In 1989 Fair Isaac Corporation first made their FICO credit scores readily available to lenders. And in 1995 the mortgage lending giants, Fannie-Mae and Freddie-Mac made FICO scores a component of their mortgage underwriting consideration. Since that time lenders have become virtually dependant on Fair Isaac’s scoring model, and the credit repair services began to focus on these powerful little numbers.
Score Distortion
The reliability of these crucial numbers is vital to excellent decisions. If something had been to threaten the validity of the FICO score undeserving borrowers would be able to obtain loans they did not deserve. Lenders making these loans would be in jeopardy of increasing default rates and potentially disastrous losses.
Credit Repair, or is it?
So you can image the concern that lenders felt as they discovered that pseudo credit repair businesses had been popping up on the Internet selling these accounts to anybody with the money to pay. In response, Fair Isaac went to work to modify their personal computer model to block the benefit of these accounts, and to end to the distortion being caused by credit repair card sellers. And so they rewrote the model and introduced it as FICO ’07. But there was a difficulty.
The Credit Repair Battle Continues
As significantly as lenders wanted to remove the score distortion caused by authorized user accounts, they had been unable to implement FICO ’07. It appears that there is a paragraph in the Equal Credit Opportunity Act (ECOA) that states that, “when lenders assess a spouse’s credit risk they are required by law to take into account the credit history of accounts which both spouses are permitted to use.”
Back to the Drawing Board
This little directive stopped FICO ’07 in its tracks and sent Fair Isaac back to the drawing board. For those of us in the credit repair company, we had been amused to see the fanfare amongst the brokers of these authorized user cards that trumpeted FICO ’07 as “illegal”, and of course continued to sell their questionable credit repair product to the public. Their celebration, however, was short lived.
Credit Repair Card Brokers Say Goodbye
On July 31, 2008, Fair Isaac announced their final answer. They have managed to produce a way to block questionable authorized user accounts from inheriting the score benefit of the donor with out blocking those of spouses and family members. So finally the death blow was dealt against the shadowy credit repair businesses selling their quick fixes.
Those Wonderful Brainiacs
The exact language of the press release reads, “We have developed technology that will reduce any impact on the FICO 08 score from intentional tampering, even though allowing the scores of spouses and other genuine authorized users to benefit from their shared credit experience.” How this works, I can’t say, but my hat is off to the brainiacs at Fair Isaac.
Credit Repair the Proper Way
Intentional distortion of the validity of credit scores was excellent for no 1. Intelligent credit repair by no means requires questionable practices. There have usually been numerous legal and powerful ways to boost your credit score, swiftly and effectively. A well-planned approach to credit repair has always produced real and lasting results that endure and truly reflect your own credit worthiness. Do it proper, and do it for real.
Copyright © 2008 James W. Kemish. All Content. All Rights Reserved.