Personal Finance

Authorized Users No Longer Allowed to Piggyback On Credit Cardholders’ Credit Scores

It used to be that authorized users on a credit card account were allowed to “piggyback” on the cardholder’s rating. If that cardholder had great credit, the authorized user’s credit score got a modest bump as well.

But, according to MSN Money’s Liz Pulliam Weston, the so-called credit repair companies have ruined the benefit for the rest of us, thanks to some well-publicized media reports.

As Liz explains in her article, here on MSN’s Money Central:

[A] handful of credit-repair companies figured out how to supercharge the process — and make serious money doing so. They solicited folks with good credit who were willing to rent out the authorized user spots on their credit cards for $100 to $125 a month. The companies then sold the slots to people seeking “instant” credit improvement for as much as $900 each. … An Associated Press story detailed the story of Alipio Estruch, a 37-year-old real-estate agent who paid $1,800 for three slots that helped boost his score from 550 to 715 in about a month, allowing him to secure a mortgage at a favorable rate. … So, even though there’s no evidence the practice of renting authorized user slots is widespread, Fair Isaac decided to change the leading FICO credit-scoring formula to ignore all references to authorized user accounts.

This change won’t happen quickly; it will start in September with one unidentified credit reporting agency (FI won’t identify it), and then the other two CRAs will pick it up over the following year. Realize, however, that this will not affect joint debtors, or joint account holders. If you and your husband both took out a loan together for a car purchase, for example, this change will not affect either party’s credit rating. But if you’re an authorized user on your wife’s credit card account, then (theoretically) after this change is implemented fully, your credit rating will no longer get the benefit of her prompt payment - and it will no longer be dinged if she falls behind.

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