BluefoxToday blog : FICO to purge scoring scam

FICO to purge scoring scam

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.



Provided by: 

Esko Kiuru
Mortgage, real estate and apartment industry analyst - syndicated mortgage, housing and property management blog
My cell: 702-499-1006

Comment balloon 8 commentsEsko Kiuru • June 21 2007 11:22PM


I agree too. Whole heartedly....bad business.
Posted by Steven L. Smith, Bellingham WA Home Inspector (King of the House Home Inspection, Inc.) over 11 years ago


It's about time they address this scam.

Posted by Esko Kiuru over 11 years ago

Esko, nice informational blog, I always like to read your blogs, you do a good work :)


Posted by Ray Saenz, Homes for Sale in Laredo, TX - Texas, Realtor (Exit Realty Laredo) over 11 years ago

Thanks for an enlightening post!

"The Pinehurst Home Team"

Posted by Wayne and Lynda Gomillion (Real Living Hagan Realtors | Pinehurst ~ Southern Pines, NC) over 11 years ago
I've heard about this before. It's an awful idea, and I agree that it is fraudulent
This is just one of a number of loop holes in the system. I applaud the Fair Isaac people for admitting this occurs and agreeing to change the FICO system but it is just the tio of the iceburg. The 3 major reporting agencies apply the scoring system to their standards and  there in itself can be a swing in scores of more than 100 ponts because of "Account Weighting" If your creditors reports only 1-3 of lets say 9 accounts you have or have had in the past 7 years and in 2001 you made 1 payment late on one of these 3 accounts your score WILL be at least 50 points lower based on the number of accounts you have rated with this agency.
Posted by Paul Moye, Broker, GRI, SRES (Benchmark Realty) over 11 years ago

Esko--Why is someone always trying to work the system? That is why there are so many foreclosures...people who don't take credit and mortgages seriously should not be given loans to buy homes. I am glad loopholes are being closed.  Good info.

Posted by Teri Eckholm, REALTOR Serving Mpls/St Paul North & East Metro (Boardman Realty) over 11 years ago


Just trying to stay on top of the latest in the market.

Wayne and Lynda,

I've been waiting for FICO to do something.


It's wrong that people with subprime credit all of sudden jump into A paper.


Right, when you have three agencies reporting, they all use a little different model.


The lending industry has to stay vigilant to keep it as honest as possible.

Posted by Esko Kiuru over 11 years ago