Piggybacking to good credit

Here's another AP story about the credit score improvement practice I blogged about last week.

With the attention this practice is getting, it's a safe bet that Fair Isaac and/or the gov't will put a stop to it soon. Probably for the best.

Comments

[Fer]

I think that the financial system is designed not to give second chances. Even bankruptcy will not give anyone a second chance.

May be some debts discarded but the consecuences of bankruptcy can be just as bad as having bad credit.

The web that is created by privately owned credit bureaus make it almost impossible for a person to recover once they get into financial problems.

ie/ If an enterpreneur loses due to x temporary circumstance (divorce, a bad investment etc...) that enterprenuer will face added obstacles that would prevent him/her from being able to make the money necessary for repayment. (much higher interest rates on loans or complete denial for them)

If its only a credit bureau problem. He/She will not be allowed to get working capital to continue operating, thus creating an ever increasing destructive circle.

If it is a checksys problem even reopening a bank account is impossible. This makes it impossible for a person to make the money necessary to repay a debt. Now we see the arising of a new practice (Piggybacking)as a response to the lack of alternatives. And we also see "the Fair Isaac corp" saying that they will change the FICO scoring system to prevent this practice.

I think that legislators should really start thinking and instead of eliminating the few alternatives that people have for recovery, come up with real solutions to allow REAL second opportunities for people that have had a temporary finanical problems. I am not talking about third chances even. Just a second opportunity.

The system created in purpose or only as a natural evolution of a set of financial controls, acts like the person that kicks whoever has fallen !

[Emily]

Did you see that FICO did decide to put a stop to it? They just announced this week that they are no longer giving credit for authorized user accounts. Our former FICO insider, John Ulzheimer, is dissecting this change on our site - http://www.creditbloggers.com/2007/06/what_does_the_f.html

[Jeff Michael]

Those are both very good comments, I especially like the post you link to, Emily. This policy change will impact women disproportionately; I hadn't considered that.

FICO probably should have changed their scoring algorithm to reward authorized users less, rather than stop giving them credit at all.

Looks like from now on, if a debtor is in need of the credit boost from someone with better credit, s/he needs to set up a joint credit account, not be put on as an authorized user.

And Fer, it isn't impossible to recover from credit problems, but it is difficult and takes a lot of time. It looks like it's going to get more difficult with this new change. There aren't any shortcuts. It's easier for me to sympathize with the credit bureaus than with ChexSystems; with credit, one's score starts to go up with every month they make their payments on time and in full. Even after bankruptcy, the score can be steadily brought up over a period of time. ChexSystems has an awful pass/fail mentality, where you're simply banned from participating in the banking system for a set period of time, with no widespread provisions for gradually reintroducing the consumer to banking status. The ChexSystems model is awful and needs to go. As for credit scoring, it works a great majority of the time, and the best we can do is advocate for those people on the margins who are being unfairly punished by the system. Historically, the bureaus have been sympathetic to these concerns. In this case, they were right to address the potential fraud issues piggybacking raises, but they may have overreacted a bit.

[Credit Guru]

I absolutely agree with you and your article, FICO score and credit history are one of the main aspects for lenders. And if you want to get bigger credit or a loan, you should work to improve your credit score. For me it was not so difficult. It takes only time and patience.

[Economic and Culture Observer]

What about secured credit cards? They look like this second chance...