Changing AU strategies to help someone build credit?

[Anonymous]

I read in another thread that FICO has changed the way AU contributes to a score because of a public fraud case, some guy purchasing AU's from strangers. "No one knows the new algorithms now" is the quote that stuck with me.

So I was thinking, if I was FICO, what would I change to make sure the AU's are legitimate? Trying to strategize, y'know. I recently added my bf as an AU on two of my cards and the idea is to try and do what we can to make sure this actualy helps him build credit.

What I'm trying so far involves him actually using the cards. Not a lot, but if I was FICO that's the first thing I would change. I'd want to see that the extra card actually went into the hands of another person and that they use it. What's handy is when we're on a date I can actually hand him his AU card to pay, so he doesn't have to be in posession of them all the time in order to use them occasionally.

For now I'm letting him keep the AmEx AU card, in part due to AmEx's awesome AU settings and also because I actually do trust him, plus he's only using it with my explicit permission for each transaction. The other one will probably just be for dates to keep things simpler.

Is anyone else modifying their AU strategies to maximize effectiveness?

[Anonymous]

People selling AU accounts to strangers was extremely common in the time leading up to the release of FICO 8.  Whole companies did it.  It's one of the reasons FICO decide to scrap AU's altogether (from a credit scoring benefit).  But that really pissed off a lot of people, particularly stay at home moms who had relied on the AU's from their husbands, so FICO put them back in but with the aim of trying to weed out the people selling them to strangers.

I share your fascination with how FICO attempts to decipher who's a "legitimate" AU or not. 

We know that they want to permit at minimum husband-wife and parent-child.  It's unclear to me, however, how you could detect all legitimate cases even of those.  Husbands and wives often have completely different last names.  A parent and child often live at different addresses.

And that doesn't begin to address domestic partnerships, brother-sister, stepfather-stepdaughter, boyfriend-girlfriend, boyfriend-boyfriend, best friends, roonmates, etc.

When you say that you put the AU card into you boyfriend's hands at a dinner so that FICO can see he's using it.... how would FICO know he's using it and not you?

[Anonymous]

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CreditGuyInDixie wrote:.

When you say that you put the AU card into you boyfriend's hands at a dinner so that FICO can see he's using it.... how would FICO know he's using it and not you?

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My thinking is that for me to use his card it would be fraud, and it's the venue's responsibility to ensure that's not happening, whether by signature or seeing I.D.. I would assume that FICO has to trust the businesses are doing their due diligence to ensure that the transactions are being made by the actual individual the card was assigned to.

For online purchases, of course, they wouldn't know. Hmm.

Glad to hear I'm not the only one curious about all this.

[Anonymous]

I still like your thinking, Batsy.  It may be several things FICO looks at, and maybe you only have to meet 4 out 11 symptoms of a legitimate relationship.  A person who is using it for restaurant transactions in the same town as the account owner would be encouraging.

[CH-7-Mission-Accomplished]

OP, I think you are overthinking this a little bit.  Your account reports to the credit bureau on your report and his report.  There is no splitup of who made the charges.  Either one of you could have made the charges or both of you, they get lumped into a total and reported for the month.  Lots of people will make a family member an AU to help them, but they do not give the person an actual card, so there is no risk of the AU running it up.  Your boyfriend is also stuck if you have high utilization or miss a payment, though he can have himself removed from the account and dispute it off his reports.

You can tell whether FICO is giving you "credit" for your AU cards by checking to see if they are included in the average age of account calculations and also the utilization equation.  If you see available credit including the AU accounts, it's being counted in full.

I'm an AU on two of my parents very old accounts and a very old account from a good friend of mine.  They all have perfect payment histories and are paid in full each month and have 30K plus limits on each card.  They all count in my FICO scoring.  I do not live at the same address and my name is obiously different from my friend's.

[Anonymous]

Very helpful, CH-7!

So do you have any idea of what kinds of AU relationships would be considered by FICO as invalid -- and how FICO goes about detecting them?  I was thinking that the experimental test was the best, and you have confirmed that two people completely unrelated by blood or marriage can be fully valid in an AU relationship.  (Not just your opinion but you have tested this out on your own profile.)

It turns out that you and your friend are in fact friends, but you might as well be complete strangers.  Do you think FICO has anything in its algorithm to detect purely mercenary AU relationships?  What might that be?

[CH-7-Mission-Accomplished]

Honestly, I don't think they probably work too hard to weed this out.  Just by telling people they won't count abusive AU's probably stops most people from doing it.

Whenever an AU reports on your credit reports, their computer knows who the primary cardholder is.  So maybe you have three accounts with your spouse (one name), two from your grandmother (one name) and two from a friend (one more name).  I still think they would count all of these.

I mean you just can't have it both ways.

And you know darned sure that if you had some purchased AU accounts, and those people started running up utilization or missing payments, you would instantly take the hit on your scores.

If people are still selling AU's, it's probably pretty underground and maybe done by some individuals that do credit repair on their own.  Some of these folks will really go over the line.  Sometimes they advise people to file police reports swearing to identity theft, and the accounts come off their reports, but they are in a whole lot of trouble if they get caught lying in a sworn statement -- and it is not the credit repair person who will be going to court!

[Anonymous]

Fascinating!  That hadn't occured to me.  So you think that FICO doesn't do anything in their alogithm at all.  It's pure PR smoke and mirrors?  They say that they are doing something to prevent it, and they rely on that to deter piggybacking?

[CH-7-Mission-Accomplished]

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@Anonymous wrote:

Fascinating!  That hadn't occured to me.  So you think that FICO doesn't do anything in their alogithm at all.  It's pure PR smoke and mirrors?  They say that they are doing something to prevent it, and they rely on that to deter piggybacking?

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Honestly, I'm just speculating what they do.  I don't know.  I've thought it through and it seems that if you see AU accounts on your reports, it is easy to figure out if they are being utilized.  The numbers appear in the FICO analysis.  They can't simultaneous count and not count the utilization and payment history that comes with the AU accounts.

As is often said on here, AU accounts are probably best used as a leg up when rebuilding, but should probably be closed out over time -- maybe leaving open just one that has a very old opening date to help with the "oldest account" metric.  Just my two cents.

When I start bucking up against having too much available credit (with 90K in three AU accounts), I will close one or two of them out.

Also, you can add someone as an AU, remove them, and then later add them back.  It is not like a one time thing.  So if you are getting ready to app and you have too much available credit, you can close out your AU accounts a month or two before apping, make sure they are not reporting or are reporting as "terminated," app for new credit, and then get re-added as an AU again.  It is dynamic.  It's not a one time only thing, though most people don't think of this.

[Anonymous]

Hi CH-7.  Well it is certainly true that FICO can't both be counting and not counting any particular AU line.  That's just the old Aristotellian law of non contradiction, as in "there is either an apple in my lunch pail or there isn't."  What is less clear is what to make of FICO's claims that it has a secret algorithm to distinguish some AU lines from others (counting some as legitimate and not others).

And I agree there are various kinds of practical steps that a particular person could take: e.g. if a person has started rebuilding with some AUs, there's various good reasons for developing an exit plan where you eventually won't rely on them any more, etc.  I certainly give that advice to people myself.

But again, it doesn't touch the question the OP and I were thinking about, which was:

Does FICO really have some secret method of classifying who they think is a legitimate AU vs. not?

What is their intended vision for it?  Who do they intend to be a valid user (from a scoring perspective) of AU lines?

How effective is their algorithm at achieving their intentions?  Are some AU lines excluded by accident?  Are some let in by accident?  How would they achieve it purely on the data in the report?  Or do they bring in extra CRA sources?

And finally, is there anything that the AU and original account holder can do (share a same address, etc.) to increase the chance that the AU will get the full benefit of it?

Note that my interest in all this is theoretical.  I don't have a dog in this race,  I am not an AU nor is any one else an AU on my accounts.  I just find it interesting from the perspective of data mining, from the perspective of what is being done and how they might do it.