The newswires have been abuzz recently with talk of the credit-score-inflating practice known as “piggybacking”. Essentially, for a fee, an intermediary will set you up as an “authorized user” of a card held by another individual, who presumably maintains a low balance and a better payment history than you do. The relationship shows up on your credit report, and you get a boost to your score.
That has apparently lead to an announcement by Fair Isaac, as reported in Insurance Journal:
Fair Isaac Corp. said this week tha the next version of its widely used FICO score will no longer consider certain types of credit card accounts, closing a loophole that allowed strangers to coattail on a cardholder’s good credit.
The new FICO score formula won’t include authorized user accounts — users on credit cards who are not responsible for paying the balances but are approved to make purchases with the cards. Often, authorized users are family members of a cardholder, such as college students on their parents’ cards or spouses who have little or no credit of their own.[...]
“We will do whatever it takes to protect the reliability and accuracy of FICO credit scores for lenders, and ensure lenders can continue to use FICO scores with confidence when making their most important customer decisions,” said Fair Isaac Chief Executive Dr. Mark Greene.
The planned adjustment is currently announced to be in the stock FICO banking credit models. There’s been no discussion of whether the company’s insurance score algorithms will also be adjusted.
Presumably, there’s a desire to do so. However, given the magnitude of the headache involved in adjusting a scoring model’s algorithm, reacquiring the necessary regulatory approvals, and working with the users of the score to account for any disruption arising from the change in algorithms….well, I wouldn’t hold my breath for the change to emerge.