FICO 2008: Better, But Not Good Enough

[Junejer]

---

cato wrote:

They once talked about eliminating the piggyback loophole but last I heard they were backing away from the notion. That's a bad play on their part, for sure. Piggybackers haven't demonstrated anything as far as responsibly using credit. All they have proven is they have a cosigner's confidence.

Piggybacking, as it has been known, is eliminated in the FICO '08 system.  The new scoring system will allow legitimate AUs (spouses, family members).  I am glad that they have done away with the immoral/illegal piggybacking, but I am also glad that they are allowing spouses and family members to benefit from AU status.

---

[haulingthescoreup]

And of course, it has been offered to lenders, but I don't know that there've been many nibbles yet. No telling when it will really catch on.

[Anonymous]

Byrdman:

Piggybacking, as it has been known, is eliminated in the FICO '08 system.  The new scoring system will allow legitimate AUs (spouses, family members).  I am glad that they have done away with the immoral/illegal piggybacking, but I am also glad that they are allowing spouses and family members to benefit from AU status.

Well, I can surely see Fico '08 allowing the piggyback option for spouses. This, at least,  is defensible on the grounds that man and wife--or even a domestic partner, I guess, are legally bound in a contractual union and finances are reasonably considered  shared responsibilities since the benefits are arguably mutual as well. Also, spouses are typically adults and can be held to higher standards of responsibility in financial affairs.

However,  I'm not sure that allowing children--even young adults--to piggyback off the well established credit of their parents is a good thing. First, they haven't done the heavy lifting of demonstrating responsible conduct in financial affairs. They're simply being handed a free pass based solely on their parents' good standing.

Secondly, piggybacking your children can lead to them being trusted with much more debt than they can reasonably be expected to handle. And isn't this kind of how we all got into this subprime mess in the first place?  Unqualified people were being handed mortgage money without the minimum bona fides to prove they could pay it back.

The only real difference being your kids would seemingly have prime credit ratings with their subprime credit histories camoflaged by your own stellar Fico scores. Isn't this a bit of a fraud, when you think about it?

Hey, I can appeciate you wanting to give your children a leg up in life--that reflects very well on you as a dad... But wouldn't it be better for them, and the credit system as a whole, to have to pull themselves up by their own bootstraps instead of handing them the fruits of your hardwork on a silver platter? 

Do people ever really appreciate anything that's been handed to them so easily and painlessly? 

Regards,

Cato 

[Anonymous]

---

@Junejer wrote:

---

@Anonymous wrote:

They once talked about eliminating the piggyback loophole but last I heard they were backing away from the notion. That's a bad play on their part, for sure. Piggybackers haven't demonstrated anything as far as responsibly using credit. All they have proven is they have a cosigner's confidence.

Piggybacking, as it has been known, is eliminated in the FICO '08 system.  The new scoring system will allow legitimate AUs (spouses, family members).  I am glad that they have done away with the immoral/illegal piggybacking, but I am also glad that they are allowing spouses and family members to benefit from AU status.

---

---

Is there a source for the details of the revised AU scoring as quoted above? I don't see how this new restriction is possible, as the relationship of the AU to the primary cardholder is information that is not available in many (most?) credit reports.

All I have seen in press releases from Fico is reference to a new unspecified method for tweaking the scoring of AUs in Fico'08/09. Elsewhere, I have read that AUs on a consumer's report will be scored as long as the report contains at least one other non-AU tradeline ...

[haulingthescoreup]

I need to hunt down the quote, I guess, but Craig Watts said that unnamed methods would be employed to verify the existence of a genuine link between cardholder and AU. (I visualize waving of hands and broad gesturing here.)

I'm going to have to keep looking, but I don't really remember a FICO source saying that only one or two lines would be scored. Could well be, though.

[Anonymous]

---

@haulingthescoreup wrote:

I'm going to have to keep looking, but I don't really remember a FICO source saying that only one or two lines would be scored. Could well be, though.

---

It was not an official Fico source, and it wasn't actually about only one or two lines being scored. The scenarios were:

If the consumer had AU tradeline(s), plus at least one other primary (non-AU) tradeline, then his/her AU tradeline(s) would be counted for scoring.

If the consumer had only AU tradelines, then his/her AU tradelines would not be counted for scoring.

Message Edited by Revike on 03-23-2009 11:31 AM

[Junejer]

---

cato wrote:

Byrdman:

Piggybacking, as it has been known, is eliminated in the FICO '08 system.  The new scoring system will allow legitimate AUs (spouses, family members).  I am glad that they have done away with the immoral/illegal piggybacking, but I am also glad that they are allowing spouses and family members to benefit from AU status.

Well, I can surely see Fico '08 allowing the piggyback option for spouses. This, at least,  is defensible on the grounds that man and wife--or even a domestic partner, I guess, are legally bound in a contractual union and finances are reasonably considered  shared responsibilities since the benefits are arguably mutual as well. Also, spouses are typically adults and can be held to higher standards of responsibility in financial affairs.

However,  I'm not sure that allowing children--even young adults--to piggyback off the well established credit of their parents is a good thing. First, they haven't done the heavy lifting of demonstrating responsible conduct in financial affairs. They're simply being handed a free pass based solely on their parents' good standing.

Secondly, piggybacking your children can lead to them being trusted with much more debt than they can reasonably be expected to handle. And isn't this kind of how we all got into this subprime mess in the first place?  Unqualified people were being handed mortgage money without the minimum bona fides to prove they could pay it back.

The only real difference being your kids would seemingly have prime credit ratings with their subprime credit histories camoflaged by your own stellar Fico scores. Isn't this a bit of a fraud, when you think about it?

Hey, I can appeciate you wanting to give your children a leg up in life--that reflects very well on you as a dad... But wouldn't it be better for them, and the credit system as a whole, to have to pull themselves up by their own bootstraps instead of handing them the fruits of your hardwork on a silver platter? 

Do people ever really appreciate anything that's been handed to them so easily and painlessly? 

Regards,

Cato 

---

Hey cato, I appreciate your point of view and have argued my point on this in previous threads, so I have no intention of doing so again. The bottom line is no, this isn't fraud. It's no more fraud than me calling up the president of the bank that I used to work for and saying "Hi Smathers, my daughter needs a job, could you look out for her?" He gives her the job off of the strength of his confidence in ME, not her. This, my friend, is done every single day in America. That's part of the free enterprise system that we currently abide under. Don't presume that everyone who will allow their children to be AU on their accounts will not/have not been teaching them what they need to know about credit and the proper governance thereof. I gave my daughter use of one of my CCs last summer, for gas purchases and other light purchases. Her job was to pay it off in full B4 the statement/reporting date. She did so every month from her summer job money. I said I wasn't going to argue the point, and I still don't intend to do so further. Should parents also not cosign for SLs? After all, they are lending that $ on the strength of the parents, not from the heavy lifting that the 18 year old has done.

[Anonymous]

Hey Byrdman,

                         I do see what you're saying. And I don't mean to rehash an old issue with you. We simply have a minor philosophical disagreement. Besides, I'm sure you wouldn't cosign for a family member if you weren't totally convinced they were responsible enough to handle it. Afterall, it's your credit rating at risk, as well, right?

And in a sense, if a person is an AU on someone else's credit that is a kind of financial relationship that could arguable be relevant for FICO scoring purposes. In this case, you're taking on the role of guarantor. But the bills are payable by them as well. This surely deserves some consideration.

But I wouldn't know about cosigning for student loans--I put myself through college on the GI Bill and never asked my parents for a penney. And back in my college days, I was stunned by how many young people were basically living off their parents achievements--footing most of their bills, supplying them with gold cards with high limits, and basically relieving them of any personal responsibility while leaving them free to run wild in Cancun and Fort Lauderdale on breaks.

It didn't occur to me, at the time, they were doing their kids any favors--in the larger scheme of things. I actually thought our nation's colleges were turning into brat factories.

I think it's unfortunate that the pull yourself up by your bootstrap mentality is an atititude in seriously short supply nowadays. Ironically, it seemed to work very well for our parents and grandparents...I don't remember my dad asking his parents or in-laws for a dime or to cosign for anything. Do you? But hey, that was way back in the day.

In any event, if Fico factors in those people whose tradelines are entirely AU based, as opposed to those people who have established tradelines on their own, that would go a long way to taking some of the moral hazard out of the system--in my humble opinion.

And as I see it, it's the integrity of the system we should be trying to protect in the interests of all consumers of credit. 

Regards,

Cato

Message Edited by cato on 03-24-2009 11:05 AM

[Junejer]

You can certainly teach your children life lessons without having them go through all of the pains that you went through. As a dad, I want better things, better opportunities and better advantages for my children than I had for myself. Each generation, IMHO, had better go further than the previous generation, if we are to progress adequately.

I actually gave my daughter use of one of my CCs that I wasn't using last summer. Her job was to have it PIF before the report date each month. She did it perfectly. I have been teaching my children about finances for years now. My parents never, ever talked about money at all.

I put myself through college by working full time and obtaining a couple of academic scholarships. The downside of that is that I didn't get to enjoy any of the college experiences that most others did. I don't want my children to have to work full time jobs and go to college full time and still barely make it through.

In the end, it's to each his own. My mind won't be changed about how I am going to assist my children, in order to give them the best possible advantages in life. This really strikes a sour chord with me, because I have seen this happen all of my life. Some unqualified jerk is working side by side with me, just because his dad is the president's dentist.

Also, Cato, everyone's bootstraps are different. They come in different sizes and lengths. What works for the Cato family may not work for the Byrd family, whose methods may not work for the Rockefeller family or JP Morgan's family. You think the latter two made their children start from scratch?

ETA a paragraph for the separate thoughts.

Message Edited by ByrdMan on 03-25-2009 10:14 AM

[Anonymous]

allowing your kid to be an AU so they can get a better rate on a car loan is hardly doing away with the pulling yourself us by your own bootstraps mentality.

buying them the car and not making them work for it is.