Authorized User Piggybacking Back in FICO Score Calculation

Piggybacking is a term used to describe how a person with bad credit or no credit history can get the benefit of somebody else’s good credit rating by becoming an authorized user on an already established, good credit account that belongs to that other person (the donor). For example, a college student with no credit history of his own could leap frog to a high credit score by becoming an authorized user on his father’s or mother’s American Express Card account. That assumes, of course, that the donor account had no dings.

Although perfectly legal, over the last several years this technique was sorely abused by unethical credit repair companies who rented out authorized user status to anybody for a fee. The creditors and credit reporting bureaus were so alarmed by what they saw as an abuse of the system that they stopped including authorized user accounts altogether in the credit scoring calculation. It is estimated that there are 50 million legitimate authorized user accounts in the US so excluding these common accounts from the credit score calculation had a wide ranging, negative affect on people who did nothing wrong.

Fair Isaac & Co., the firm which originated the popular FICO credit scores, now says it has found a way to again include authorized user accounts in credit score calculations when they are legitimate while still having a way to exclude the for-fee-only piggy-backers. The company did not reveal any of the details of how it intended to separate legitimate authorized users from the renters. Only Fair Isaac has made this announcement but it’s safe to say that the highly competitive nature of the credit reporting industry will compel Experian and TransUnion to quickly implement similar technology.

Fair Isaac spokesperson, Lisa Nelson, vice president of Global Scoring, says that the new FICO algorithm will allow the scores of spouses and other genuine authorized users to benefit from their shared credit experience. The change should go into effect in the FICO 08 credit scoring system.

The change will be transparent to most credit consumers, two-thirds of whom would not know a credit score from a golf score to begin with. People with bad credit shopping for easy credit repair, however, should be on the alert for the fly-by-night credit repair outfits that start offering piggy-back rentals again. If we can take Fair Isaac at its word on this, and there is no reason not to, then paying for a piggy-back rental to artificially boost a FICO credit score is a waste of money.