Used to be family members could gang up to boost credit scores. No more.
By Carolyn Bigda, Money Magazine staff writer
September 5 2007: 6:33 PM EDT
(Money Magazine) -- A sea change in credit scoring could deflate your magic number: Fair Isaac, which calculates the widely used FICO score, recently announced that it would no longer recognize authorized-user accounts.
Popular with families, the accounts allow, say, a mom with a high credit score to share a line of credit with her child. The account history appears on the child's credit report and can help bolster the kid's score.
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In the past year it became possible to buy authorized status on prime credit lines from strangers online, a practice that led to the recent change in rules.
While an authorized user's credit score likely won't drop overnight - it can take lenders months to adopt a new scoring model, and some may never make the switch - the accounts are no longer a reliable way to boost someone's score. Deal with the fallout as follows:
- If your spouse or adult child is an authorized user with no other history, have him or her get a secured card. These require little or no credit history but do necessitate a cash deposit. Once he or she proves creditworthy, it's possible to switch to a traditional card.
- If your kid is an authorized user and in college, get him his own card now (shop at cardtrak.com), as it'll be easier to get approved while still a student. Note: It takes six months to get a FICO rating.
- If your spouse or child is an authorized user with poor credit, encourage him or her to pay bills on time: More than a third of the FICO score is based on this.
