If your FICO score comes in too low you can go online and look up a specialty company there that will help you boost it by up to 300 points. Go from, say, 500 to 750 in a matter of weeks. That improvement will make a large difference when you apply for a mortgage, not only putting you in a position to get a home loan in the first place, but also making you eligible for a lower rate and possibly fewer fees. How is that doable, you might ask?
Here's how it works. These specialty Internet companies recruit credit card holders with excellent payment backgrounds to rent their credit by allowing borrowers with poor credit to be added as authorized users on their accounts. The companies then pay the renters a percentage from the fees they collect for their dubious services. Allegedly the renters can make several Ks a month by doing this.
The fake users have no access to the credit card itself and therefore cannot charge anything on it. But FICO's software will now spread the renters' stellar payment histories straight to the files of all authorized names on the account. This in turn will promptly hike the scores for the fake users.
Typically parents have added their children on their credit card accounts as authorized users, or they could be close relatives or friends. That has been the pattern up until now. Federal law permits anyone to become an authorized user, in other words there are no limits to how many it can be. And the specialty Web companies are the first ones to shout that they are not violating any laws and they are not trying to defraud the mortgage industry.
But mortgage lenders, federal and state regulators and credit businesses think otherwise. They see a serious problem with this practice, asserting that the home loan application becomes fraudulent with this massaged information. And FICO largely agrees with this assessment. It has a new model, FICO 08, ready to launch in September and it will effectively do away with this practice. I have to agree with that.