Our office is buzzing with the recent Fair Isaac announcement about a change to their scoring formula. The FICO score algorithm rarely changes this significantly. In fact, the last major FICO score update was in the 1990′s.
If you haven’t heard yet, Fair Isaac has decided to no longer count authorized user accounts in their credit score calculations. That means that you won’t get credit score "points" for accounts where you are listed as an authorized user anymore. You can read all about this FICO score change in a detailed article I wrote with our credit scoring expert, John Ulzheimer. John used his connections with FICO, where used to work, to get the inside scoop.
So what does this change mean to your personal credit scores? We came up with a list of eight things to look out for:
- Once this change goes
into effect you will no longer get any value out of being an authorized
user on someone else’s credit card. - It is quite possible that your credit scores could go down, significantly, because of this change.
- If
you have paid to have your name added to someone else’s credit card as
an authorized user it is possible that you are guilty of defrauding
lenders. It would be in your best interest to have your name removed
as soon as possible and stop doing business with these companies as
they are violating federal and state laws. - If you
have been paid by a company to rent out your credit card accounts then
you may be guilty of enabling credit fraud. It would be in your best
interest to stop the presses. - If you are
getting married soon and were planning on closing your credit card
accounts because you were going to be added as an authorized user on
your spouse’s credit cards it is a good idea to rethink that move. - If
you are married and do not have any credit cards where you are the
primary cardholder or a joint cardholder, you may want to open one or
two in your name. - Women will be disproportionately
impacted (negatively) than men because more times than not, it’s the
woman who is added as an authorized user. - Those
of you who are new to this country or are a young person trying to
establish credit (or re-establish credit), you may have to depend on
secured credit cards or other non-prime credit products to establish
credit.
Do you have a question about the FICO formula change news? Or do you want to talk to one of our credit experts about this news? Send us an email!
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So what does this mean for husband and wife who share a credit card? I can’t recall if we paid to have us both included (probably not), but if the card is in my wife’s name and she has a shorter/worse credit history than my stellar one, do I lose?
…or perhaps I’m missing the difference between “joint” account holders and “authorized” users.