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Authorized User Accounts

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CreditBob
Established Contributor

Authorized User Accounts

About a week ago I talked to Myfico customer service. This summer authorized user accounts will no longer be calculated into the fico score.

 

Everyone had a different feeling or opinion on this. So regardless of what any of us thinks we need to stick to the facts. The fico score ranges from 300-850. In order for any lender to truly use the score the information on the credit report needs to accurately backup those three digit numbers. This includes account age, balances, etc. as well as the actual account holder making the payments to each lender listed as the trade line on each credit bureau.

 

A creditor will not know what level of risk an individual is if a fico credit score is just handed to someone because they are listed as an authorized user and have not made any payments to an account(s) that actually belong to them. These types of accounts are for another person that has been approved by the account holder to have access to that account's funds.  It was never supposed to be part of the score. Those fico scores need to be earned. There are lenders that are not using AU accounts.

Message 1 of 27
26 REPLIES 26
ficonightmare
Frequent Contributor

Re: Authorized User Accounts

That's ridiculous. What about spouses that have been AU's for decades? 

 

What about people that get married and are added on eachothers cards as AU's?? It makes much  more sense rather than to open new accounts jointly.

 

While I understand why they're doing this, I still think it's a huge mistake. Millions of responsible people that know how to manage credit will now be penalized because of this change.  It's just wrong. 


Starting Score: 600s
Current Score: EQ 08 798 on 5/28/14, TU 792 on 5/27/4 via Barclay, EX 798 on 5/28/14
Goal Score: 760


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Message 2 of 27
Revelate
Moderator Emeritus

Re: Authorized User Accounts

This summer?  Are we talking FICO '08 or FICO 9 which I believe the new release is being officially labelled?  We're going to have to get our nomenclature straight Cat Tongue

 

Anyway, they tried this with the FICO '08 version which resulted in a backlash of screaming from sea to shining sea, just for the reasons that ficonightmare suggests: there are legitimate uses to AU's and suddenly hundreds of thousands if not millions of people lost access to new credit entirely through no fault of their own.  Changing a core system in such a fashion is awkward to say the least.

 

Subsequently FICO backed that out of the algorithm and implemented an anti-AU abuse piece which supposedly cracked down on the more eggregious uses of AU's vis a vis piggybacking (AU's for cash), while allowing legitimate uses in familial relationships.  

 

I'm not certain why FICO would be going back to the old standard, when it appears the new standard may be flunking legit use cases too but we have only recently seen complaints on that one here on the forums (this FICO '08 change to Scorewatch has really opened some things up for discussion), but the arguments which ficonightmare suggests are still as good today as they were back then, and I expect the same thing will happen if it goes through.

 

That all said, CSR's are rarely perfectly informed, this could simply be an innacurate statement.




        
Message 3 of 27
CreditBob
Established Contributor

Re: Authorized User Accounts

I have gone to a credit seminar & talked to different lenders that I know, and here is what they had to say.

 

Just like the consumer depending on the information & scores being accurate that they are treated fairly, the creditors depend on the information in the same fashion. A good credit rating is based partly on payment history. What does this mean. We'll it means that that individual has applied for credit as the primary account holder and or has been cosigned for because they did not qualify on their own. In other words their credit had to be pulled. In addition to that the primary or cosigner had to demonstrate financially responsibility through their very own actions by making monthly payments.

 

An authorized user account holder does not demonstrate responsibility. There is no way a lender can even determine their level of risk because they make no payments.  And Piggybacking or transferring the information from the account holder, or one that owns the account, has no place on another indiviual's credit profile unless they are a cosigner of the account. In other words they are responsible for payments being made on time. And on a last note, authorized user accounts came out before the fico credit score and where only specifically intended to have access to the funds of the account holder.

 

 

Message 4 of 27
Revelate
Moderator Emeritus

Re: Authorized User Accounts


@CreditBob wrote:

I have gone to a credit seminar & talked to different lenders that I know, and here is what they had to say.

 

Just like the consumer depending on the information & scores being accurate that they are treated fairly, the creditors depend on the information in the same fashion. A good credit rating is based partly on payment history. What does this mean. We'll it means that that individual has applied for credit as the primary account holder and or has been cosigned for because they did not qualify on their own. In other words their credit had to be pulled. In addition to that the primary or cosigner had to demonstrate financially responsibility through their very own actions by making monthly payments.

 

An authorized user account holder does not demonstrate responsibility. There is no way a lender can even determine their level of risk because they make no payments.  And Piggybacking or transferring the information from the account holder, or one that owns the account, has no place on another indiviual's credit profile unless they are a cosigner of the account. In other words they are responsible for payments being made on time. And on a last note, authorized user accounts came out before the fico credit score and where only specifically intended to have access to the funds of the account holder.

 

 


I agree with all of that from a lender perspective and they've been stating that for nearly a decade at this point; however, it's going to cause screams in the mortgage market though fortunately that'll likely be the last place it's felt.

 

I've always recommended that people establish their own credit, and lenders (Chase, others) have had a practice of discounting AU's anyway either in their internal algorithm or in their underwriting using some Oujia board score estimation.  The problem is the vast majority of consumers never find this forum: we're talking what, maybe .005% of the population?  

 

Simply put, lenders are free to do what they want, and I understand that FICO is lender-driven since they are the customers, but I don't think the consumers learned from the last time this was tried.  

 

Maybe it'll go through, but anyone who's found this forum really had better have opened up their own accounts, but start looking for 50-100 point drops in people's FICO under the new model or straight back to thin/no-file status in some cases.

 

ETA: this is a stupid implementation: lenders could just stop reporting the AU's.  Done, same mess, same fuss, but they don't want the blame falling on themselves from a marketing perspective probably.  Bah, hope FICO is getting well paid for this one.

 




        
Message 5 of 27
ficonightmare
Frequent Contributor

Re: Authorized User Accounts

I have my own CC's. But my highest limit ones are the ones I'm an AU on. Chase and Citi specifically. So while I may lose those CL's, I'm assuming I'll also lose the higher balances those cards usually carry as well. 

 

 

For my AAoA, my own accounts are the oldest (thank you amex for backdating). In fact, if my Chase and Citi cards will no longer count, my AAoA may actually go up!

 

So for someone like me, this wouldn't really have much of an affect. But for others, with very low CL's and high utility, or no cards other than AU's- well, they're screwed.

 

There's gotta be a better way to do this. 

 

 

 

 


Starting Score: 600s
Current Score: EQ 08 798 on 5/28/14, TU 792 on 5/27/4 via Barclay, EX 798 on 5/28/14
Goal Score: 760


Take the FICO Fitness Challenge

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Message 6 of 27
Revelate
Moderator Emeritus

Re: Authorized User Accounts


@ficonightmare wrote:

I have my own CC's. But my highest limit ones are the ones I'm an AU on. Chase and Citi specifically. So while I may lose those CL's, I'm assuming I'll also lose the higher balances those cards usually carry as well. 

 

 

For my AAoA, my own accounts are the oldest (thank you amex for backdating). In fact, if my Chase and Citi cards will no longer count, my AAoA may actually go up!

 

So for someone like me, this wouldn't really have much of an affect. But for others, with very low CL's and high utility, or no cards other than AU's- well, they're screwed.

 

There's gotta be a better way to do this. 

 

 

 

 


Yeah the traditional case around all the complaints has been about married couples: individual vs. household income, and the non-wage earner simply being AU's on the spouse's cards.

 

The problem then becomes either in a divorce or a death in the family, the other person is left with nothing from a credit perspective, and that's absolutely not where anyone wants to be.  If gets worse if AU's are discounted as now they can't even prepare by opening up a few cards beforehand... literally people will need to start preparing years ahead and we're not always given that much time.  Very few folks plan that far ahead these days from what I've seen.

 

I agree there should be a better method of handling this, but I don't know what it is.  Figure HHI has to come back with a vengeance otherwise there's going to be lots of additional underbanked people in the future as these life events occur.

 




        
Message 7 of 27
abundancejones
Regular Contributor

Re: Authorized User Accounts

CreditBob, you sure do have an axe to grind concerning AUs. 

 

Even if the FICO9 version discounts AUs, it will several years before it becomes the standard score lenders use. In fact, I think most smaller banks stick to 04. 

 

Regardless, I'm taking advantage of AU..getting my own cards and building my credit from there. 

Message 8 of 27
bobebob
Frequent Contributor

Re: Authorized User Accounts


@CreditBob wrote:

I have gone to a credit seminar & talked to different lenders that I know, and here is what they had to say.

 

Just like the consumer depending on the information & scores being accurate that they are treated fairly, the creditors depend on the information in the same fashion. A good credit rating is based partly on payment history. What does this mean. We'll it means that that individual has applied for credit as the primary account holder and or has been cosigned for because they did not qualify on their own. In other words their credit had to be pulled. In addition to that the primary or cosigner had to demonstrate financially responsibility through their very own actions by making monthly payments.

 

An authorized user account holder does not demonstrate responsibility. There is no way a lender can even determine their level of risk because they make no payments.  And Piggybacking or transferring the information from the account holder, or one that owns the account, has no place on another indiviual's credit profile unless they are a cosigner of the account. In other words they are responsible for payments being made on time. And on a last note, authorized user accounts came out before the fico credit score and where only specifically intended to have access to the funds of the account holder.

 

 


I am an AU on my Mom's AMEX account and I would dissagree with some of the above:

I became an AU not because my credit scores weren't high enough (in signature), but because my mom is the one on the Costco account and AMEX card and for what ever reason, they couldn't make it a joint account.  And guess whose very own actions make sure the bill gets paid every month? Smiley Happy

 

I also asked for and we recieved a significant CLI (from about $5K to $20K) based on my personal credit history, not hers.  I was informed that I personally would be held responsible for any unpaid bills incurred on the card issued in my name.

 

Don't lump all AU's into the same lot.

bobebob || Nov: My FICO SW EQ(Upgraded Version) = 822 ||Sept: Walmart TU Fico=838Goal = FICO's>800 || In my wallet: CostcoAmEx(20k), DCU Visa Platinum (10k), BoA Visa Signature (17.1k), Walmart Discover (7.5k), AmEx Corporate (5k). All PIF every month.
Message 9 of 27
Revelate
Moderator Emeritus

Re: Authorized User Accounts


@bobebob wrote:

@CreditBob wrote:

I have gone to a credit seminar & talked to different lenders that I know, and here is what they had to say.

 

Just like the consumer depending on the information & scores being accurate that they are treated fairly, the creditors depend on the information in the same fashion. A good credit rating is based partly on payment history. What does this mean. We'll it means that that individual has applied for credit as the primary account holder and or has been cosigned for because they did not qualify on their own. In other words their credit had to be pulled. In addition to that the primary or cosigner had to demonstrate financially responsibility through their very own actions by making monthly payments.

 

An authorized user account holder does not demonstrate responsibility. There is no way a lender can even determine their level of risk because they make no payments.  And Piggybacking or transferring the information from the account holder, or one that owns the account, has no place on another indiviual's credit profile unless they are a cosigner of the account. In other words they are responsible for payments being made on time. And on a last note, authorized user accounts came out before the fico credit score and where only specifically intended to have access to the funds of the account holder.

 

 


I am an AU on my Mom's AMEX account and I would dissagree with some of the above:

I became an AU not because my credit scores weren't high enough (in signature), but because my mom is the one on the Costco account and AMEX card and for what ever reason, they couldn't make it a joint account.  And guess whose very own actions make sure the bill gets paid every month? Smiley Happy

 

I also asked for and we recieved a significant CLI (from about $5K to $20K) based on my personal credit history, not hers.  I was informed that I personally would be held responsible for any unpaid bills incurred on the card issued in my name.

 

Don't lump all AU's into the same lot.


An Amex AU (ACM in Amexese) is the only exception to the rule.

 

I'd be interested to know how the tradeline reports as it is seperate from the base cardholder's tradeline and they are liable for the charges they incur: does it even list as AU at all?




        
Message 10 of 27
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