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Earlier this week, June 1, 2007, the Fair Isaac Corporation announced a major change to the FICO credit scoring formula. Authorized user accounts will no longer be factored into the scoring formula.

This modification will occur later this summer and as a result, consumers who are listed as authorized users on credit card accounts will probably see a major change in their credit scores.

This change will be a negative force on the credit scores of most consumers. The only consumers that are likely going to see an increase in their credit scores are those that are listed as an authorized user on negative accounts or accounts that have balances that are close to the credit limit.

The inclusion of a friend or family member as an authorized user on an existing credit card account used to be a simple method for establishing credit. It was common for parents to add their children to their credit card accounts as authorized users in order to help them establish credit histories.

Conversely, it has common for credit repair organizations to fraudulently sell authorized user account access to consumers with credit issues. This credit repair loophole was one of the main reasons for the FICO score change.

What does this mean to me?
 - There will be no benefit of being an authorized user on someone elseís credit card.
 - As a result of this change, it is probable that your credit score is going to drop.
 - If you have paid for the ability to have you name included to someone else's credit card as an authorized user it is likely that you are in the wrong for deceiving lenders. If this is the case, remove your name immediately and stop doing business with these companies being that they are in violation of federal and state laws.
 - You are enabling credit card fraud if you have agreed to be paid by a company to rent out your credit card accounts.
 - It is a good idea to rethink your motives if you are getting married and are thinking about closing out your accounts because you plan on adding your name as an authorized user on your spouseís credit cards.
 - It is probably a good idea to open some credit card accounts in your name if you are married do not have any credit cards where you are the primary cardholder or a joint cardholder.
 - Women will be much more negatively impacted than men being that its the women who are added as an authorized user more often.
 - If you are new to the country, or are looking to establish credit, you will likely have to rely secured and subprime credit card offers to help establish credit.

More questions and answers...

How is this going to impact consumers?
Any consumer that has benefits as a result of being an authorized user on an accounts will see their credit scores go down. Basically they will be 'losing credit' for these accounts.

What is an authorized user account?
This means customers are allowed to be added to another person's credit card account without having their credit checked. The authorized user will then be able to use the credit card and have their account activity appear on their credit report. The authorized user has no liability for the payments.

How many people will be impacted by this change?
It has been reported by Fair Isaac that 35% of the American population has an authorized user account listed on their credit reports. Therefore 65 80 million people are going to be affected.

Why is FICO implementing this change?
This is a result of the credit repair organizations abusing the authorized user system. Some companies were selling access to authorized user accounts as a way to help people with credit problems improve their scores. This practice is illegal. In some cases, this service would cost the consumer thousands of dollars.

How is it going to be possible for people with no credit to establish their credit without authorized user accounts?
There are a variety of effective means for build credit. People with no credit can still apply for their own gas credit card, retail credit card, secured credit card or subprime credit card as a way for building credit.




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