Tuesday, June 05, 2007

Fair Isaac Tightens Standards to Stop Credit Boosting Practices

After the rash of articles this past weekend on th new wave of credit boosting services being offered over the internet, Fair Isaac Corp. announced that it will adjust its FICO scoring formula in a way that will remove authorized user accounts from consideration by the scoring model.  This change will take place in FICO 08, which is exected to become available to lenders in September. This action is intended to ensure the continued reliability and predictive power of FICO scores and protect lenders and FICO scores from abuse of authorized user credit card accounts by a new kind of credit repair service that sells consumer credit card histories to credit applicants in order to purposefully misrepresent the applicants’ own credit history to lenders and other businesses.

“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,” said Dr. Mark Greene, CEO of Fair Isaac.  ”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.”

An authorized user is a person permitted by a credit account holder to use an account, typically a family member who is managing credit for the first time. Used legitimately, authorized user account information has helped both lenders and consumers by enabling lenders to use FICO scores when making credit decisions for consumers who are starting to establish a credit history. Fair Isaac’s research indicates that the next version of its FICO scoring formula will deliver increased predictive power without considering authorized user accounts. 

Fair Isaac will work closely with lenders to help them implement and benefit from the FICO 08 score as it becomes available.  As the company announced previously, lenders will be able to use the new version of FICO scores with minimal changes to their own operating systems. To make lender adoption easier and faster, the new scoring model will retain the same scoring range, score reason codes, minimum scoring criteria, inquiry treatment, and related model parameters as previous versions of the FICO formula.

mortgage fraud

1. Glad to hear this will be available to lenders in Sept.

   Posted by  on  06/05  at  10:45 AM

2. Credit misrepresentation is fraud.  Plain and simple.  The intent is to deceive a lender.

   Posted by  on  06/05  at  01:19 PM

3. I’m not sure why an internet story FINALLY got the ball rolling on stopping this scam - this “credit repair” technique has been used for years & has helped un-creditworthy borrowers buy houses they could not afford, which many times results in defaulted loans, contributing to the 20% foreclosure rate across the U.S. They had the capability to stop this a long time ago, I’m glad they are finally get around to it. What a stupid theory anyway - why does a family member (or any one else’s) acct help someone who doesn’t even own it? It simply doesn’t make any sense. Being an “authorized user” shouldn’t be ANY bearing on whether someone has credit depth - IT’S ABOUT TIME!!! STOP THE FRAUD!!!

   Posted by  on  06/05  at  10:57 PM

4. I find it very interesting that FICO is taking such a firm stand. When people obtain their credit report from sponsored sites (mycreditreport.com, etc.) the score can vary significantly from what a lender may obtain. In fact, all three bureaus are involved in a class action suit for the same. No wonder that the public is using credit boosting sites. None of the three bureaus or FICO will willingly help any consumer with regard to information on their credit report.

   Posted by  on  06/06  at  04:36 AM

5. This is a very positive step.

   Posted by  on  06/06  at  07:31 AM

6. This will help with the opposite problem as well - when someone with BAD credit authorizes some family member to use their credit card.

   Posted by  on  06/07  at  03:18 AM

7. Great to see an industry leader cinching up it’s belt. Definitely a step in the right direction.

   Posted by  on  06/07  at  03:32 AM

8. as far as i am concerned the scores have too much variance and we need a more standadized account.how you can have a score of 400 on eqifax,500 on experian,and 600 on transunion is beyond me .  also inquiries should be stricken from the credit code because too many of them are not legitimate.everytime you are shopping for new carinsurance,a mortgage,and or any other thing that people are checking out should not penalize you.

   Posted by  on  06/08  at  03:45 AM