topic Re: Request For New Laws REgarding Authorized Users, Finance Companies to Representative in General Credit Topics

Request For New Laws REgarding Authorized Users, Finance Companies to Representative

CreditBob — Fri, 10 Aug 2012 18:33:53 GMT

Message Subject:
Authorized User Accounts
Message Text:
I would like to see all authorized user accounts permanently banned & being reported to all of the credit bureaus. The credit report rating & the fico credit scoring system is set up so that it accurately measures credit risk of an individual. In addition it sets the internet that the consumer will get on credit cards, auto loans, personal loans, & mortgage loans. Individuals that have authorized user accounts on their credit report are getting a high score when they have made no payments. It is not fair to the rest of us that make our payments on time. I was reading that some states consider this to be financial fraud because they are getting a lower rate they through their actions of their own account history are getting these high scores & credit ratings. Creditors have no way to measure what kind of credit risk these types of consumers are. For this reason Utah Community Credit Union will not use these types of accounts. But there are lenders that will. The truth in lending policy or act (federal law) needs to be changed. There are consumers that are getting very low rates & loans that should never have gotten them in the first place. I am comparing this to the credit & mortgage crisis back in 2008 where people have gotten credit or mortgages that should have never been approved int he first place. Please pass a bill that prohibits any authorized user account to be on any credit report with all the credit reporting agencies. Second, I would like to see a federal law so that a loan through a finance company is treated the same way as if you went to a bank or credit union. here is what is going on. The credit bureaus are causing your fico credit score to be at least 50 points less on the fico credit score because you are using a finance company. Now I am on my second loan with Springleaf Financial Services & I have never been late. In fact all my accounts, open & closed, are paid as agreed & on time. How on earth a I a higher credit risk. It's bad enough when they charge you 25% or higher. I would also like a law that allows consumers to have good accounts removed from any credit report if the information is harming the individual's credit rating or credit score, such as a finance company being reported

Re: Request For New Laws REgarding Authorized Users, Finance Companies to Representative

Anonymous — Fri, 10 Aug 2012 19:00:48 GMT

Finance companies would have a smaller pool of people to take advantage of. This would cause more competition. More competition means lower rates. Lower rates mean less ROI, which leads to decreased investing. Decreased investing means less money to loan.

It's highly politicized, too. We're being sold on the idea that access to credit is a basic inalienable right SAPs would be denied without the ability to become an AU.

Re: Request For New Laws REgarding Authorized Users, Finance Companies to Representative

pizzadude — Fri, 10 Aug 2012 19:15:31 GMT

I'd suggest that you forward your concerns to your represenatives & senators as they have the standing to pass such a law.

While it is true that FICO and even some other scoring models include AU accounts, you can rest assured that almost all creditors are sophisticated enough to parse out individual and AU accounts on credit reports, and to make lending decisions based on that, rather than just on a score.

Also, you are vastly overstating the FICO score impact of a "consumer finance" accounts ~ the damage caused by this would be nowhere near 50 points.

Re: Request For New Laws REgarding Authorized Users, Finance Companies to Representative

AndySoCal — Fri, 10 Aug 2012 23:15:34 GMT

Regarding authorized user accounts I would disagree with banning them completely. There are some legitimate uses for an authorized user account. I think FICO in the latest FICO score model has taken prudent steps in revising how the score model calculates the score when this type account is present..

Re: Request For New Laws REgarding Authorized Users, Finance Companies to Representative

webhopper — Sat, 11 Aug 2012 02:23:20 GMT

@creditbob Its likely that your score drop from adding the springleaf account was due to inquiries and decrease in average account age. I would argue that someone who has to take out any sort of small personal loan to finance something like furniture or appliances DOES represent a higher risk than persons who just pay cash for those items. I think that's why FICO only likes to see a small number of installment loans rather than a lot of really small ones.

Re: Request For New Laws REgarding Authorized Users, Finance Companies to Representative

dude11 — Sat, 11 Aug 2012 03:59:13 GMT

I thought having a mixed of different types of credit was a good thing versus say 20 millions credit cards and maybe a car loan and or mortgage? So if you have a few loans whether it be auto, mortgage, or personal could end up hurting you?

Re: Request For New Laws REgarding Authorized Users, Finance Companies to Representative

llecs — Sat, 11 Aug 2012 04:30:03 GMT

OP, AUs can't be omitted because of the Equal Credit Opportunity Act. Even if so, it'll be unfair to families out there. There are quite a number of spouses who forego applying for credit and rely on the spouse for income, credit worthiness, etc. Eliminating AUs would be detrimental to that segment, especially when it comes time to app for a mortgage, car, etc.

ETA...Springleaf is considered a very high risk loan and high rates are the norm. It's also a consumer finance loan and viewed on par as a payday loan.

Re: Request For New Laws REgarding Authorized Users, Finance Companies to Representative

webhopper — Sat, 11 Aug 2012 05:14:40 GMT

I saw a score increase of about 15 point when I went from 3 installments down to two. Now that I have two mortgages; the mortgage actually shows up as a real estate account. I also saw a huge score boost when I consolidated my student loans into one tradeline versus 7. As with everything Ymmv.... this is just based on my experience. My mix is as follows Major cc - 3 Installment accounts - 2 retail cards - 3 Mortgage accounts - 2 Other accounts - 1

Re: Request For New Laws REgarding Authorized Users, Finance Companies to Representative

Anonymous — Sat, 11 Aug 2012 05:24:10 GMT

@ Ilecs,

How is it be unfair considering that segment chose itself?

I'm for AUs but not the idea of limiting its use to protect one group.

Re: Request For New Laws REgarding Authorized Users, Finance Companies to Representative

tbolt2 — Sat, 11 Aug 2012 08:39:17 GMT

My wife does not work. I am the income source for our family of three. Except for one account, if an account allows the addition of an AU, we have added each other as AU's.

In a few years, I will add my stepson as an AU on at least one of our accounts - IF - he is responsible and behaves. He's only 8 now....if he had a FICO score based on his attitude and behavior right now, he wouldn't even qualify for a First Premier rebuilder card with 35% interest....

If not for the benefits of AU's on accounts:

my wife would not be able to maintain the excellent credit score she had before we were married
she would not have been able to establish any current credit history
I would not have been able to rebuild my credit as quickly as I have been able to on my own

Most importantly to me, the ability to add someone as an AU on our accounts has provided me with more options to take care of my family if a financial emergency occurs.It provides each of us with options if something should happen to the other. I sleep a little better at night knowing we have a significant amount of available credit, in addition to our savings and insurance. These options would not exist without AU's and the credit reporting that comes with it.

Re: Request For New Laws REgarding Authorized Users, Finance Companies to Representative

Anonymous — Sat, 11 Aug 2012 13:20:07 GMT

@ tbolt2,

Each of those consequences is the result of opting to stay home. Why should the law arbitrarily decide who benefits from AU status?

Re: Request For New Laws REgarding Authorized Users, Finance Companies to Representative

AndySoCal — Sat, 11 Aug 2012 23:44:56 GMT

Authorized user accounts were never meant for people to help others raises their credit score. Considering in most cases has done nothing to build the credit history or are responsible for the account which they are benfiting form credit wise. One exception to what I just said is Tbolt2's wife and their are others. This is one reason why I like how FICO has adjusted their scoring model for authorized user accounts.

Re: Request For New Laws REgarding Authorized Users, Finance Companies to Representative

Anonymous — Sun, 12 Aug 2012 15:49:57 GMT

@ Andy,

They probably shouldn't score AU accounts. It's not like being added to someone else's card actually shows responsible use of credit.

Re: Request For New Laws REgarding Authorized Users, Finance Companies to Representative

tbolt2 — Sun, 12 Aug 2012 19:16:17 GMT

@Anonymous wrote:
@ Andy,

They probably shouldn't score AU accounts. It's not like being added to someone else's card actually shows responsible use of credit.

Actually, in my case it does I am AU on several on my wife accounts. I provide all the income and pay all the bills......

Re: Request For New Laws REgarding Authorized Users, Finance Companies to Representative

Anonymous — Sun, 12 Aug 2012 19:32:53 GMT

I meant responsible use of one's own credit, t.

AU/ACM definitely gives people advantages in rebuilding, borrowing, utilization, and thickening files. I'm just opposed to arbitrarily deciding who can benefit from the practice and the silly arguments people used when complaining about whatever version of FICO ignored AUs.

For some weird reason, the AMEX I'm AU on came off EQ in March. I don't really know how much losing its CL/history affected score.

Re: Request For New Laws REgarding Authorized Users, Finance Companies to Representative

AndySoCal — Tue, 14 Aug 2012 01:43:25 GMT

@DrKaje

I mentioned in my orginal post Tbolts case is valid use of an authorized user type account. There other examples as well. In Tbolts case they should be included in the score.