Discussion on Autorized User Accounts

[Itsmeagain]

In a previous thread . .

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@Anonymous wrote:

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The concern that lenders and CRA's have is that many people attempt to jump start or bypass the normal and natural process of credit by establishing unwarranted or unrealistice credit which is not actually indicative of the borrowers capacity or history to pay.

Eventually, with this type of "credit" the CRA and FICO community has to either raise standards across the board to offset the data contamination (accurate prediction of risk) or they must begin to differentiate tradelines that are not accurate predictors or representative tradelines of borrower dependability.

Some may ask:  "What is so different from this, than from somebody establishing a large CL through a savings secured credit card?"  And this is a valid question.  I myself re-established with a $15,000 Savings Secured Gold Mastercard through Amalgamated Bank of Chicago.

And here is the difference.  If you have $15,000 to put into savings and can meet the issuers qualifications to obtain a large CL on major card, this IS PREDICTIVE and indicative of the borrowers ABILITY and CAPACITY to pay.  Obviously it accurately represents my level of risk (I can and will pay the outstanding balance) and my capacity to pay (I have money in the bank meaning reserves).

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Tx, this is a good analysis . . . . BUT . . . . . if your observation is true, shouldn't the CRA and FICO community raise the standards to offset this data contamination?  After all; how does an "authorized user" tradeline predict or indicate the borrowers ability and capacity (or willingness), to pay?  Is this not jumpstarting or bypassing the natural process of credit?  Surely these are not accurate predictors or representative tradelines of borrower dependability.

[Anonymous]

I believe the discussion this was under was about people building credit by using Crown Jewelers as a TL. In this case I totally agree...there is little difference I can see in using AU accounts to establish credit and using Crown Jewelery. Neither gives a true indication of the uses ability to use and repay credit.

[smallfry]

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@Anonymous wrote:
I believe the discussion this was under was about people building credit by using Crown Jewelers as a TL. In this case I totally agree...there is little difference I can see in using AU accounts to establish credit and using Crown Jewelery. Neither gives a true indication of the uses ability to use and repay credit.

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You would have to agree that a teenager or a toddler being gifted Daddy or Mommy's 30 year old credit card history is a heck of a lot more abusive than someone with their very own CJ revolving account. 

[JoeBJay20]

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@smallfry wrote:

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@Anonymous wrote:
I believe the discussion this was under was about people building credit by using Crown Jewelers as a TL. In this case I totally agree...there is little difference I can see in using AU accounts to establish credit and using Crown Jewelery. Neither gives a true indication of the uses ability to use and repay credit.

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You would have to agree that a teenager or a toddler being gifted Daddy or Mommy's 30 year old credit card history is a heck of a lot more abusive than someone with their very own CJ revolving account. 

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I thought the entire discussion was hilarious.  With all of the morally questionable tactics promoted on here (with the AU being one of them), I found it highly comical that this particular tactic (Crowne Jewelers) hit a nerve with so many people.  If you want to get technical about it, we all are gaming and/or have gamed the system to a certain degree.  

[Anonymous]

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@Itsmeagain wrote:

In a previous thread . .

______________________________________________________________________

@Anonymous wrote:

---

The concern that lenders and CRA's have is that many people attempt to jump start or bypass the normal and natural process of credit by establishing unwarranted or unrealistice credit which is not actually indicative of the borrowers capacity or history to pay.

Eventually, with this type of "credit" the CRA and FICO community has to either raise standards across the board to offset the data contamination (accurate prediction of risk) or they must begin to differentiate tradelines that are not accurate predictors or representative tradelines of borrower dependability.

Some may ask:  "What is so different from this, than from somebody establishing a large CL through a savings secured credit card?"  And this is a valid question.  I myself re-established with a $15,000 Savings Secured Gold Mastercard through Amalgamated Bank of Chicago.

And here is the difference.  If you have $15,000 to put into savings and can meet the issuers qualifications to obtain a large CL on major card, this IS PREDICTIVE and indicative of the borrowers ABILITY and CAPACITY to pay.  Obviously it accurately represents my level of risk (I can and will pay the outstanding balance) and my capacity to pay (I have money in the bank meaning reserves).

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Tx, this is a good analysis . . . . BUT . . . . . if your observation is true, shouldn't the CRA and FICO community raise the standards to offset this data contamination?  After all; how does an "authorized user" tradeline predict or indicate the borrowers ability and capacity (or willingness), to pay?  Is this not jumpstarting or bypassing the natural process of credit?  Surely these are not accurate predictors or representative tradelines of borrower dependability.

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Excellent follow up Itsmeagain.  I addressed the secured card but forgot to address the AU.

AU is somewhat predictive, though somewhat misleading.  It can be somewhat predictive IF AND ONLY IF it is a true Authorized User account.  Why?  Because a truly "authorized user" has access to and uses the card and account.  The card and account must be paid or both the AU and Primary are going to get hit on the CR.  The Primary "acts" in sort as a quasi co-signer, because they are adding the user and accepting responsibility for the account and its payment.  The account is a real account, representing real use and real products/services and real extension of real credit with real risk.  Wow, lots of "real" there.

And that is my point, "real."  However, an AU who is on the account but has no access, no use, and potentially no real connection or association to the primary is like CJ.....an attempt to bypass credit processes and risk analysis.

This is why fico08 initially intended to do away with inclusion of AU accounts.  And why?  Because people misused AU as a way to bypass the intended use and therefore natural analysis of those accounts.

Companies began to match good CR's to people willing to "buy the tradeline" as an AU.  This is in direct correlation to the CJ situation.  People not really showing true credit on their CR, just a "figment" tradeline in order to get a FICO boost unwarranted.

However, when FICO/08 suggested the exclusion of AU, those who legitimately used AU objected.  Parents, spouses and close family members could no longer use their credit to assist their family members with legitimate AU additions.

The end result is that FICO/08 is going to continue to include AU, but they are supposedly going to somehow judge if it is "legitimate."  I would suppose that this might mean that the primary and AU need to have same address.  Or there needs to somehow be a legitimate "connection" to the primary and AU, such as same name or other family relationship.  Or possibly the CRA's will begin to work with CCC's to suggest that AU's are issued a card with unique identifier information on the card.   Maybe a different CVCC2 (3 digit security code) or maybe a different card number or something else.  The possible use of this would be to determine if the AU is in fact authorized to "USE" the account or just added to be a tradeline.

Hard to say what will happen.  Whatever they do, there will be those who look for the loophole in order to exploit any vulnerabilities, and thus eventually new changes and rules or possibly they will finally axe all together AU in FICO/20xx.

ADDITIONAL THOUGHTS:  The point I wish to make in this whole topic can be compared to antibiotics.  It used to be that if you got sick, they gave you antibiotics.  However, we now face mutated and antibiotic resistant strains that the antibiotics are now marginally useful against.

So, when measures are used to "game the system" as some have suggested, eventually the system compensates to offset, just as Itsmeagain has suggested.  And therefore the short term gains of perceived credit are long term losses.  FICO will either change the formulas, disallow various types of previously counted accounts (such as AU) and CRA's will kick others off, such as Crown.

Good credit is a direct reflection of good financial management and decisions.  Those who "con" the system usually end up defaulting on the system also.  Therefore those measures these individuals used to get credit will come under attack by FICO, CRA's, lenders, etc.

So I don't know that any nerve has been hit, except that there is the short term view on credit and the long term outcome, such as that we now see in the financial markets.  Consumers consumed credit they could not afford and lenders extended credit that they should not have extended.  Results:  obvious and now the circumstance we all must deal with.

[smallfry]

I think the original intent of AU was to at least even the playing field for a work at home spouse who chose not to be in a position to get their own cards. Pretty much anything else with a few exceptions is abusive.

[Anonymous]

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@smallfry wrote:
I think the original intent of AU was to at least even the playing field for a work at home spouse who chose not to be in a position to get their own cards. Pretty much anything else with a few exceptions is abusive.

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I agree that a spouse is legitimate.  I also believe that children are legitimate uses as well.  I have given cards to my children and teach them its use.  I require them to pay those expenses which are theirs.  I hold them accountable for their use and over see their repayment.  My children are in fact authorized "users" and not just authorized tradelines.

[Itsmeagain]

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@Anonymous wrote:

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So, when measures are used to "game the system" as some have suggested, eventually the system compensates to offset, just as Itsmeagain has suggested.  And therefore the short term gains of perceived credit are long term losses.  FICO will either change the formulas, disallow various types of previously counted accounts (such as AU) and CRA's will kick others off, such as Crown.

Good credit is a direct reflection of good financial management and decisions.  Those who "con" the system usually end up defaulting on the system also.  Therefore those measures these individuals used to get credit will come under attack by FICO, CRA's, lenders, etc.

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EXACTLY!!

I'm not advocating for, nor condeming AU's.  In fact, I have MY daughter listed as an AU on three of my CC accounts for the express purpose of helping her to learn how to manage credit wisely and improve her credit score.  She has the card for each account but must ask permission before using them.  In two years she has never violated our agreement and is building her own credit slowly, by acting responsibily.  Incidentally, the CVV is different on her cards so it would be possible to diffrentiate between what the primary and the AU does with the account.  So, we agree that a "real" authorized user is demonstrating that, with supervision they can act responsibly with credit products. 

Personally, I built my credit the old fashoned way, I earned it through careful attention to my credit and following the advice that I found here and at other consumer boards.  However, the fact that someone can simply purchase a higher credit score distresses me.  Not because of the obvious fact that such behavior is dishonest but because I fear that the continued allowance of, shall we say, "un-authorized users", (users who have no access to use the account but glean the benefits of the primary's good credit), will inevitably convince the CRA and FICO community to revise the scoring model that will ultimately have a negative effect on all credit scores (read mine). 

As you suggest, there is a way to separate the wheat from the chaff but in the process, I hope the powers that be do not overreact and destroy a viable way to help our families in their quest to level the playing field for all.

However, I do NOT agree with JoeBJ20, who said:

"If you want to get technical about it, we all are gaming and/or have gamed the system to a certain degree."

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I suppose it would be up to the individual to supply their own definition of "gaming" but when that word is used in context with improving one's credit posture, it implies that there is something immoral or illegal involved.  Personally, I have never seen a single post in this forum (that wasn't promptly removed), that advised, promoted or even suggested illegal activity.  As for the morality; since when is it immoral to pay your bills on time or even early?  How is it immoral to ask for forgivness when you've made a mistake (such as a GW letter)?  Where is the immorality in offering a CA money to remove a TL when the CA paid pennies for the debt?  What is immoral about asking a CRA to modify your CR to reflect the truth?

Perhaps, JoeBJ20, you would supply us with your version of "gaming".  Maybe we have all missed the point and could enjoy the hilarity you seem to have found here.

Message Edited by Itsmeagain on 06-20-2009 05:14 PM

[JoeBJay20]

Itsmeagain,

I never said illegal, nor implied illegality.  But my point was that we've all taken advantage in some degree.  If the credit report is supposed to be indicative of your payment history, then having legitimate negative items such as late payments removed before their time skews that history to some degree.  But that's the thing about morality, it's all relative.  To some, using Crowne Jewelers as a paid tradeline is immoral, to others, gaining 20 years of someone's credit history that you had no role in shaping by becoming an AU is immoral.  Both skew your true credit history to some degree, so yes it's funny to me when people pick and choose which one of those is wrong.  

[smallfry]

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@JoeBJay20 wrote:

Itsmeagain,

I never said illegal, nor implied illegality.  But my point was that we've all taken advantage in some degree.  If the credit report is supposed to be indicative of your payment history, then having legitimate negative items such as late payments removed before their time skews that history to some degree.  But that's the thing about morality, it's all relative.  To some, using Crowne Jewelers as a paid tradeline is immoral, to others, gaining 20 years of someone's credit history that you had no role in shaping by becoming an AU is immoral.  Both skew your true credit history to some degree, so yes it's funny to me when people pick and choose which one of those is wrong.  

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I agree with you for the most part but there is a however. Equifax has taken it upon itself to remove 6 credit card accounts 4 were closed in 2002 2 closed in 2004. So 4 were closed 7 years after closure 2 just 5 years after closure. Due to their error/negligence/worse I have lost a significant portion of my credit/payment history. AAofA from 3 6 down to 2 7 oldest account 9 down to 7. I say if you can get them to remove negatives early have at it. They don't have your best interests at heart. I called and asked them to kindly remove a BK which is 9 years 2 months old. Oh no we can't do that. But they can remove 6 perfectly good tradelines which according to their own website can remain 10 years after closure. FWIW a BK can remain up to 10 but it doesn't state it must remain 10 years.