Re: FICO NO LONGER COUNTS AUs!

Anonymous · ‎06-05-2007

DeeT,

I have several friends who naively thought the same thing. Now they are trying to bail their college kids out of CC woes so a poor credit report won't negatively impact their job applications when they graduate.

As it's already been said, many companies drop the requirements for college students and fall all over themselves to issue them credit!

I've heard it mentioned that in some cases these companies estimate the amount of student loans as income (Figure that one out if you can

)

The CCC's are predicting when these students graduate, they will quickly advance to a high income bracket and they want to make sure their cards are in those wallets.

To add to the problem, it's very easy to get a lot of high tech toys with big teaser discounts offered only to college students. Same reasoning, companies are trying to build buyer loyalty early in the game!

Message Edited by Felicity on 06-05-2007 07:46 PM

Anonymous · ‎06-05-2007

@MidnightVoice wrote:
There are people who will suffer. My wife is a freelance artist, and most of her credit is as an AU on my accounts. This could severely depress her credit score, which is fine as long as nothing happens to me.

And many people who go through a divorce might find they have problems getting credit.

You are exactly right. So much for the ECOA.

§ 502. Findings and purpose The Congress finds that there is a need to insure that the various financial institutions and other firms engaged in the extensions of credit exercise their responsibility to make credit available with fairness, impartiality, and without discrimination on the basis of sex or marital status. Economic stabilization would be enhanced and compe-tition among the various financial institutions and other firms engaged in the extension of credit would be strengthened by an absence of discrimination on the basis of sex or marital status, as well as by the informed use of credit which Congress has heretofore sought to promote. It is the purpose of this [Equal Credit Opportunity] Act to require that financial institutions and other firms engaged in the extension of credit make that credit equally available to all creditworthy customers without regard to sex or marital status.

psyberchologist · ‎06-05-2007

Here's the problem we're going to face. It's not so much the fact that people were using the AU loophole to their advantage, it's the result of what happens when the score no longer figures into it. Everyone that has a CC probably has one that includes a "Universal Default" clause which basically says that they can increase your interest rate if you default on other cards or if your credit takes a turn for the worst. By removing the AU from the formula, people's scores are going to go down. In turn, there's going to be a lot of people who now will have to pay a higher interest rate on their cards as a result of this change.

Anonymous · ‎06-05-2007

Equal Credit/Fair Opportunity has nothing to do with AUs. I states that a lender may not consider gender or marital status when deciding whether or not to extend credit. IE. A lender declining a single woman because if she becomes preagnent she might take time off work and not be able to make the payments. 20yrs ago lenders would use that as a reason to decline a customer. Equal Credit/Fair Opportunity is meant to put an end to gender discrimination. Not counting AUs has nothing to do with this law.

Anonymous · ‎06-05-2007

that 1st line was supposed to read "It states" not "I states". That was a typo.

Anonymous · ‎06-05-2007

Don't forget to ask your Senators to cosponsor and support S.1395

http://ficoforums.myfico.com/fico/board/message?board.id=generalcredit&message.id=5937

Anonymous · ‎06-06-2007

@Anonymous wrote:
Equal Credit/Fair Opportunity has nothing to do with AUs. I states that a lender may not consider gender or marital status when deciding whether or not to extend credit. IE. A lender declining a single woman because if she becomes preagnent she might take time off work and not be able to make the payments. 20yrs ago lenders would use that as a reason to decline a customer. Equal Credit/Fair Opportunity is meant to put an end to gender discrimination. Not counting AUs has nothing to do with this law.

I have to humbly disagree.

(6) Credit history. To the extent that a creditor considers credit history in evaluating the creditworthiness of similarly qualified applicants for a similar type and amount of credit, in evaluating an applicant's creditworthiness a creditor shall consider:

(i) The credit history, when available, of accounts designated as accounts that the applicant and the applicant's spouse are permitted to use or for which both are contractually liable; {{4-30-03 p.7216}}

Wife of A and Wife of B both apply for a 100K mortgage. They have similar household income levels. Wife A has established her own credit. Wife B, has never done so, and is permitted to use her spouse's credit. Under FICO's latest model, Wife B might now have a -0- FICO and be denied credit.

The statute continues on with:

(2) Statement of specific reasons. The statement of reasons for adverse action required by paragraph (a)(2)(i) of this section must be specific and indicate the principal reason(s) for the adverse action. Statements that the adverse action was based on the creditor's internal standards or policies or that the applicant, joint applicant, or similar party failed to achieve the qualifying score on the creditor's credit scoring system are insufficient.

Message Edited by maple on 06-06-2007 06:58 AM

Anonymous · ‎06-06-2007

http://biz.yahoo.com/fool/070605/118107065741.html?.v=1&.pf=banking-budgeting

check this out.. you guys right.. people are working hard to have good credit score why others just "buy some" from others as authorized user ..

Anonymous · ‎06-06-2007

@Anonymous wrote:

@Anonymous wrote:
Equal Credit/Fair Opportunity has nothing to do with AUs. I states that a lender may not consider gender or marital status when deciding whether or not to extend credit. IE. A lender declining a single woman because if she becomes preagnent she might take time off work and not be able to make the payments. 20yrs ago lenders would use that as a reason to decline a customer. Equal Credit/Fair Opportunity is meant to put an end to gender discrimination. Not counting AUs has nothing to do with this law.

I have to humbly disagree.
(6) Credit history. To the extent that a creditor considers credit history in evaluating the creditworthiness of similarly qualified applicants for a similar type and amount of credit, in evaluating an applicant's creditworthiness a creditor shall consider:
(i) The credit history, when available, of accounts designated as accounts that the applicant and the applicant's spouse are permitted to use or for which both are contractually liable; {{4-30-03 p.7216}}

Wife of A and Wife of B both apply for a 100K mortgage. They have similar household income levels. Wife A has established her own credit. Wife B, has never done so, and is permitted to use her spouse's credit. Under FICO's latest model, Wife B might now have a -0- FICO and be denied credit.

The statute continues on with:
(2) Statement of specific reasons. The statement of reasons for adverse action required by paragraph (a)(2)(i) of this section must be specific and indicate the principal reason(s) for the adverse action. Statements that the adverse action was based on the creditor's internal standards or policies or that the applicant, joint applicant, or similar party failed to achieve the qualifying score on the creditor's credit scoring system are insufficient.

Message Edited by maple on 06-06-2007 06:58 AM

Maple - Welcome, and thanks for providing part of the statute.

Originally, AUs were only spouses (read: wives) . The problem is that CCCs have extended AU privileges to anyone the cardholder chooses. The law doesn't apply to someone who isn't married to the cardholder, so it isn't going to help many AUs out there.

As for the second part of the statute, it doesn't mean that it's insufficient for a creditor to turn you down because you're an AU (if you're suggesting that "similar party" means AU). It means that if a creditor turns you down, they have to give you a specific reason, and it's not enough for them to hide behind the excuse of "you didn't score high enough on our own secret scoring system."

Anonymous · ‎06-06-2007

Maple - Welcome, and thanks for providing part of the statute.

Originally, AUs were only spouses (read: wives) . The problem is that CCCs have extended AU privileges to anyone the cardholder chooses. The law doesn't apply to someone who isn't married to the cardholder, so it isn't going to help many AUs out there.

As for the second part of the statute, it doesn't mean that it's insufficient for a creditor to turn you down because you're an AU (if you're suggesting that "similar party" means AU). It means that if a creditor turns you down, they have to give you a specific reason, and it's not enough for them to hide behind the excuse of "you didn't score high enough on our own secret scoring system."

Thanks for the welcome. I understand why the ECOA was enacted, and I understand that someone somewhere has made a business out of it (which I don't agree with FWIW), but for Fair Isaac to paint with such a broad brush "no AUs will be considered" is stepping down a very slippery slope. As far as the law not applying to someone who isn't married, I've read and reread the section I put up till my head aches, its very gray. One could almost read it to say if Dirty AU seller, sells the authorization to both spouses of a marriage, then the law would apply. I'm no attorney - but I don't see it as too far fetched an argument for an experienced litigator to throw out there. Secondly, I didn't put other parts of the statute up (I was trying to be short), but it continues on and discusses the use of ex-spouses credit - so yes in some sense it does apply to unmarried people as well. Finally, in community property states in particular, although a spouse may be an AU on a credit report, by virtue of the community estate they are almost always legally liable for a debt.

As for the 2nd part of the statute, how many times have you read that someone needs to reach xx score to get a mortgage? Creditors have always had to come up with a valid reason (that will without a doubt) correspond with FICO reasons. "Insufficient credit history" will be a big one, and now it will affect AU spouses (wives) greatly.

I'm sorry if I'm hard to understand, I find quoting here harder than on many forums. I'll get the hang of it eventually.

FICO WILL NO LONGER COUNTS AUs!