Your FICO credit score may change soon

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6/28/2007, 5:36 pm

Fair Isaac (the company which developed the FICO credit score) has announced their next version of FICO scoring will no longer consider authorized user accounts. This change is being made to address an industry concern about the impact of authorized user accounts on credit risk.

An authorized user account is one in which a person other than the one responsible for paying the balance is allowed to make purchases with a credit card. Authorized users are usually spouses or college students who have little or no personal credit.

Authorized users can improve their credit score is an account’s primary cardholder maintains a low balance and pay on time over a long period of time.

While authorized user accounts have been around for a long time, it’s the current concern over credit renting that Fair Isaac is addressing with the new scoring method. Credit renting is the act of allowing someone with a poor credit score to become and authorized user on the account of someone with a good credit score. The person with a good score makes a few bucks and the person with the poor credit score boosts their score because they’re an authorized user on an account with a good score.

The new scoring method will be introduced in few months to one of the three major credit reporting agencies. The other two will begin using the new FICO scoring method in 2008.

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