Authorized user accounts have an interesting place in the history of credit repair. Five years ago they gained popularity as a magic credit score booster capable of adding a quick 100 points almost overnight. Lenders fought back as the use of this credit repair trick became more widespread. Finally, at the end of 2008, Fair Isaac Corp., the custodian of the sanctity of the FICO score, put a stop to Authorized User Account abuse. But many people can still put this credit repair device to good use.
What is an Authorized User Account?
Authorized user status on a credit card offers the use of an account without qualification. A common example is card usage given by parents to a college-bound child. Setting up authorized user status is as easy as making a call to the credit card company and informing them that you would like another person to have a copy of your card, “in case of an emergency.”
Gray Market Credit Repair
The controversy about these accounts arose after gray-market credit repair services began mass marketing third party authorized user accounts online. From a lender perspective the use of these accounts to artificially increase one’s credit score was fraudulent. Loan decisions were being made daily on the basis of inflated scores that did not represent the borrower’s credit-worthiness.
Fair Isaac Corp. modified the FICO formula in their FICO ’08 score update to block the benefit of brokered authorized user accounts. I can speculate that this formula works by identifying the number of users placed on accounts; too many users and the benefit is blocked. There may be an additional criteria included in the algorithm, but Fair Isaac does not make their formula public.
The Credit Repair Benefit
This does not mean that there is no credit repair benefit to be had from these accounts; quite the contrary. The full benefit is still available when there is a legitimate relationship between the donor and the beneficiary, as between family members. This was made entirely clear in the Fair Isaac press release on the issue. These benefits will be preserved. In conclusion, although authorized user accounts are not a substitute for building positive credit in your own name, if you are sincerely working on credit repair and want a little help you might consider this handy option.