The Finch Formerly Known As Gold

7 April 2007

We represent the Loophole League

I don't track my FICO score too closely. I do know that it jumped a bit after I bought the house, a bit more after I no longer had a car payment to deal with, and then sagged about the time I had to start dealing with car payments again. It has never occurred to me to start taking extraordinary steps to prop it up.

Especially steps this extraordinary:

[S]ome borrowers are turning to a fast-growing business on the Internet: companies that claim to boost credit scores by transplanting the credit DNA of people with excellent payment histories into the credit files of people with sub-par histories — ostensibly without breaking any law.

The companies claim to raise FICO credit scores by 50 to 250 points or more by adding low-scoring borrowers as "authorized users" onto the credit card accounts of people with FICO scores well in excess of 700. The positive payment information from such cardholders then flows into the files of the persons with sub-par credit.

This, of course, assumes that Warren Buffett is too busy to notice Donnie Deadbeat's presence on his credit report, and maybe that's a fairly safe assumption. Usually "authorized users" tend to be family members — say, daughter away at college — but they don't have to be:

Federal law, however, does not limit the number or prescribe the type of authorized users permitted on any single account. Nor does it prohibit the rental or sale of authorized user designations. Exploiting that loophole, numerous companies have popped up on the Internet offering to buy and rent out the credit card "trade lines" or accounts of credit cardholders with high limits combined with perfect payment histories.

The idea that the not-inconsiderable sum paid by the debtor for this dubious FICO boost might be applied more usefully to reducing his debt doesn't seem to enter into the picture. And to think we were surprised by mortgage fraud.

(Via Fark.)

Posted at 10:40 AM to Common Cents