Sometimes it's the only way to help people out of the Catch-22 that if they don't have credit they can't get credit. The way we help consumers improve their FICO score is perfectly legal and completely legitimate under the current rules and regulations governing this industry.
Denver, CO (PRWEB) February 17, 2009
More than a year and a half after it was first announced, FICO® 08 -- an updated version of the FICO® credit score system -- is finally making its debut in '09.
Fair Isaac Corp., creator of the FICO credit score (Fico score), announced the first usage of the controversial FICO 08 when TransUnion utilized the new credit scoring program on January 29th. Equifax is expected to adopt the new system later this year. Experian Group, Ltd. has yet to institute the new system and is not expected to do so anytime soon, pending an unsettled lawsuit with Fair Isaac.
Initially proposed in June 2007, the original intent of FICO 08 was to stop the use of credit piggybacking as a method to improve your credit score. Credit piggybacking is a legal method of improving a personal credit rating by adding an individual as an "authorized user" onto an account of a person who already has good credit. This quickly and dramatically raises the authorized user's FICO credit score.
Fair Isaac took the position that the consideration of "authorized user" accounts in their scoring model was a loophole that needed to be closed.
A Failed Attempt:
This matter gained notoriety in January of 2008 when Fair Isaac's attempt to halt the practice of credit piggybacking as a way to improve your credit score was challenged as illegal by BoostMyScore.NET, a Denver, Colorado-based company.
BoostMyScore.NET, which utilizes credit piggybacking to improve the FICO score of its' clients, was of the opinion that ignoring authorized user accounts in an individual's credit report was illegal -- and Congress, the Attorney General, and the FTC agreed.
In July of 2008 Fair Isaac, following the counsel of the FTC, conceded before a Congressional subcommittee that BoostMyScore.NET was correct in its finding that it would be illegal to ignore authorized user credit histories in calculating FICO credit scores. This further legally confirmed credit piggybacking as a legitimate method to improve your credit score.
About Credit Piggybacking:
"By using the practice of credit piggybacking, those who deserve a good FICO credit score end up with one," explains Bill Airy, BoostMyScore.NET's founder and President. "Sometimes it's the only way to help people out of the Catch-22 that if they don't have credit they can't get credit. The way we help consumers improve their FICO score is perfectly legal and completely legitimate under the current rules and regulations governing this industry."
"We're not getting good scores for deadbeats with bad credit," Airy clarifies. "Credit piggybacking doesn't change or erase a bad credit history or make a bad credit risk suddenly look good. It just helps those who need to establish credit and/or raise their credit score to qualify for a loan and optimal financing terms. It's an important service for legitimate borrowers, especially as the credit markets continue to tighten."
"We're not gaming the system in any way," Airy asserts. "Fair Isaac created the system and we just play by their rules. But those rules can sometimes work against responsible, credit-worthy people. Credit piggybacking is one way of correcting and counterbalancing the flaws in their own system."
Airy's July 2008 victory required Fair Isaac to significantly revise FICO 08, which accounts for the delay in its release.
Fair Isaac Corp. says they have found ways to make it harder for authorized users to benefit from primary account holders' good credit, but neither the public nor the credit industry is privy to how they will be doing that, or how it will play into their "super secret" FICO score formula. Some industry insiders believe FICO 08 will limit the number of "authorized user" accounts to five; and reduce the benefit of lines that exceed that number.
FICO 08 also includes provisions that will - among other things -- reduce the negative impact of collections under $100 on an individual's FICO score and increase the negative impact of multiple late payments. How any one individual's credit score will specifically change as result of FICO 08 remains to be seen.
Industry experts predict that it will take more than a year for the lending industry to fully adopt the revised credit scoring model and that it will be quite some time before consumers actually experience the effects of these changes.