| Credit Repair Insight | | | | Credit Repair, or is it? |
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| Authorized user accounts have long been the | | | | So you can image the concern that lenders |
| subject of debate in credit repair circles. | | | | felt as they discovered that pseudo credit |
| These accounts can boost your credit scores, | | | | repair companies were popping up on the |
| but is it fraud? A credit repair expert | | | | Internet selling these accounts to anyone |
| provides excellent insight into the recent | | | | with the money to pay. In response, Fair |
| resolution of this controversial issue. | | | | Isaac went to work to modify their computer |
| Common Practice | | | | model to block the benefit of these accounts, |
| | | | and to end to the distortion being caused by |
| It is a common practice for parents to give a | | | | credit repair card sellers. And so they |
| child a credit card. It's good for | | | | rewrote the model and introduced it as FICO |
| emergencies and handy for everything from | | | | '07. But there was a problem. |
| summer camp to college life. It is also | | | | |
| common for one spouse to make the other | | | | The Credit Repair Battle Continues |
| spouse an additional card member. | | | | |
| | | | As much as lenders wanted to eliminate the |
| A Little Software Bug | | | | score distortion caused by authorized user |
| | | | accounts, they were unable to implement FICO |
| None of these practices are even slightly | | | | '07. It seems that there is a paragraph in |
| questionable. Additional card member accounts | | | | the Equal Credit Opportunity Act (ECOA) that |
| didn't attract the attention of lenders or | | | | states that, "when lenders assess a spouse's |
| Fair Isaac Corporation, the creator of the | | | | credit risk they are required by law to |
| credit-scoring model used by lenders when | | | | consider the credit history of accounts which |
| they make credit decisions, until they | | | | both spouses are permitted to use." |
| noticed an interesting bug in the | | | | |
| credit-scoring model which was to spawn a | | | | Back to the Drawing Board |
| questionable little sub-business in the | | | | |
| credit repair industry. | | | | This little directive stopped FICO '07 in its |
| | | | tracks and sent Fair Isaac back to the |
| A Cool Credit Repair Trick | | | | drawing board. For those of us in the credit |
| | | | repair business, we were amused to see the |
| It seems that as soon as the new account | | | | fanfare amongst the brokers of these |
| appeared on the credit report of the | | | | authorized user cards that trumpeted FICO '07 |
| beneficiary their credit score would jump. In | | | | as "illegal", and of course continued to sell |
| other words they were inheriting the credit | | | | their questionable credit repair product to |
| history of the card from the donor. In the | | | | the public. Their celebration, however, was |
| case where the donor had excellent credit the | | | | short lived. |
| beneficiary discovered their own credit score | | | | |
| jumping significantly, often over one hundred | | | | Credit Repair Card Brokers Say Goodbye |
| points, a cool little credit repair trick, | | | | |
| but not what Fair Isaac really had in mind. | | | | On July 31, 2008, Fair Isaac announced their |
| | | | final solution. They have managed to create a |
| Word Spread Quickly | | | | way to block questionable authorized user |
| | | | accounts from inheriting the score benefit of |
| Well, the word quickly spread. And as always | | | | the donor without blocking those of spouses |
| happens, creative entrepreneurs thought up a | | | | and family members. So finally the death blow |
| way to package this small credit repair | | | | was dealt against the shadowy credit repair |
| miracle and sell it to absolutely anyone who | | | | businesses selling their quick fixes. |
| had the money and desire to give their credit | | | | |
| score a quick, albeit undeserved boost. And | | | | Those Amazing Brainiacs |
| it is this undeserved issue that became the | | | | |
| real problem. | | | | The exact language of the press release |
| | | | reads, "We have developed technology that |
| FICO in our Life | | | | will reduce any impact on the FICO 08 score |
| | | | from intentional tampering, while allowing |
| In 1989 Fair Isaac Corporation first made | | | | the scores of spouses and other genuine |
| their FICO credit scores available to | | | | authorized users to benefit from their shared |
| lenders. And in 1995 the mortgage lending | | | | credit experience." How this works, I can't |
| giants, Fannie-Mae and Freddie-Mac made FICO | | | | say, but my hat is off to the brainiacs at |
| scores a part of their mortgage underwriting | | | | Fair Isaac. |
| consideration. Since that time lenders have | | | | |
| become virtually dependant on Fair Isaac's | | | | Credit Repair the Right Way |
| scoring model, and the credit repair services | | | | |
| began to focus on these powerful little | | | | Intentional distortion of the validity of |
| numbers. | | | | credit scores was good for no one. |
| | | | Intelligent credit repair never requires |
| Score Distortion | | | | questionable practices. There have always |
| | | | been many legal and powerful ways to boost |
| The reliability of these important numbers is | | | | your credit score, quickly and effectively. A |
| essential to good decisions. If something | | | | well-planned approach to credit repair has |
| were to threaten the validity of the FICO | | | | always produced real and lasting results that |
| score undeserving borrowers would be able to | | | | endure and truly reflect your own credit |
| obtain loans they did not deserve. Lenders | | | | worthiness. Do it right, and do it for real. |
| making these loans would be in jeopardy of | | | | |
| increasing default rates and potentially | | | | Copyright © 2008 James W. Kemish. All |
| disastrous losses. | | | | Content. All Rights Reserved. |
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