I heard that the new version of FICO (the credit scoring formula) eliminates the benefit of authorized user accounts. Is this true?
Prior to the release of FICO 08 (the latest version of the FICO credit scoring model) Fair Isaac announced that they were going to end the benefit of all authorized user accounts by removing them from the credit score calculation. The goal was to eliminate the widespread abuse of gray-market credit repair companies that were brokering authorized account memberships on the internet. The practice at the time was widespread and as a result many loans were being made to people on the basis of credit scores that had no connection with their own payment history.
The Fair Isaac announcement was met with objections from consumer groups on the grounds that many innocent people would suffer as the result of the restriction. And even more decisively, lenders, as the primary users of FICO data, challenged the legality of using FICO 08 under ECOA (Equal Credit Opportunity Act) which states that when lenders evaluate a spouse’s credit risk they are required by law to consider the credit history of accounts which both spouses are permitted to use.
As the result of all of this resistance Fair Isaac modified FICO 08 to continue to include legitimate authorized user accounts while blocking the brokered ones. So, if you have a willing friend or family member that would like to help you get your credit repair effort of to a good start you can have them add you to one or two of their accounts as an authorized user. Here is a quote from their press release:
“This breakthrough resolves an industry problem that we know has perplexed lenders and concerned regulators. We have developed technology that will reduce any impact on the FICO 08 score from intentional tampering, while allowing the scores of spouses and other genuine authorized users to benefit from their shared credit experience. This kind of innovation is why Fair Isaac’s analytic scientists are regarded as the best in the world.”