New FICO Changes Might Cause Lower Scores
Friday July 27, 2007
Several changes are on the horizon in the way your FICO credit score is calculated.
One of the biggest changes is the removal of authorized user accounts from the credit scoring calculation. This credit repair tactic has recently come under fire for its use in defrauding mortgage lenders. As a result, consumers will no longer receive points on their FICO score for being an authorized user on someone else's account.
Who'll be affected the most? According to Credit.com, 60-75 million people will be affected by the change, mostly young people who use their parents' credit cards to start building their own credit history and people who are trying to rebuild their credit by using their family members' good credit.
The oldest account on my credit report happens to be an account on which I am an authorized user. Not having this account considered will shorten my credit history and remove seven years of positive payment history from my credit score calculation. Since payment history is 35% of my credit score and length of credit history is 15%, my credit score will likely drop. Other consumers might experience similar results.
There's a chance the result could be positive for some. If you are an authorized user on an account that has several delinquencies and a high balance, you might see a slight boost in your credit score.
To combat negative effects of this change, credit card accounts can be converted to joint accounts. Check with your creditor for more information. Note that some creditors require a credit check on the joint-applicant before converting the account. If the joint-applicant has poor or no credit history, the application can be denied, or approved but at a higher interest rate.
The changes are scheduled to be rolled out to Experian in September of this year and to Equifax and TransUnion in early 2008. CORRECTION: Fair Isaac has not announced which credit bureau will first receive the new credit score model. They have only stated that one credit bureau will receive the new model in September this year and the other two will receive it in early 2008.
Primary account holders shouldn't be affected by these authorized user changes.
Poll: Will your credit score be affected by the authorized user changes?
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One of the biggest changes is the removal of authorized user accounts from the credit scoring calculation. This credit repair tactic has recently come under fire for its use in defrauding mortgage lenders. As a result, consumers will no longer receive points on their FICO score for being an authorized user on someone else's account.
Who'll be affected the most? According to Credit.com, 60-75 million people will be affected by the change, mostly young people who use their parents' credit cards to start building their own credit history and people who are trying to rebuild their credit by using their family members' good credit.
The oldest account on my credit report happens to be an account on which I am an authorized user. Not having this account considered will shorten my credit history and remove seven years of positive payment history from my credit score calculation. Since payment history is 35% of my credit score and length of credit history is 15%, my credit score will likely drop. Other consumers might experience similar results.
There's a chance the result could be positive for some. If you are an authorized user on an account that has several delinquencies and a high balance, you might see a slight boost in your credit score.
To combat negative effects of this change, credit card accounts can be converted to joint accounts. Check with your creditor for more information. Note that some creditors require a credit check on the joint-applicant before converting the account. If the joint-applicant has poor or no credit history, the application can be denied, or approved but at a higher interest rate.
Primary account holders shouldn't be affected by these authorized user changes.
Poll: Will your credit score be affected by the authorized user changes?
View Results
Comments
This proposed rule violates Regulation B of the Federal Reserve Board. Reg B was designed to help spouses (women) whose credit was totally dependent on their husband’s. Hopefully, this violation of the Equal Credit Opportunity Act and implementing regulations will not have to be tested in the courts. If possible, could “About” obtain a quote from Fair Isaacs’ legal department on this topic?
Thank you.
This will impact alot of people that have done credit repair in the last year.
The whole scoring method is a joke. Ask any accountant, IRS agent or financial professional the thing that hurts Americans the most are credit cards. According to FICO, the more you have the higher your credit score. I have NO debt and no credit cards, and my FICO is around 600. I was told that FICO is self perpetuating, in that they WANT you to use credit cards ( they are a credit and financing business ) and if you don’t, they don’t make money – so they penalize you for not using their cards, even more than you are penalized for using cards and paying late or short-paying. I own my own house, business and two cars, and my credit rating is 600? Go figure. Big business, the only game in town in the USA.