Authorized User Credit aka Piggyback Credit remains a part FICO 08

In 2007 there was a lot of talk about the end of authorized user credit also known as piggyback credit, as a means to boost credit scores. The benefits of becoming an authorized user is the primary account holder’s credit could improve the authorized user’s credit scores and help build a solid credit history.

Fair Isaac Corporation (FICO) announced they were rolling out a new credit scoring model that did not factor in authorized user accounts.

The primary account holder has to have a good history of on-time regular payments. But if the primary account holder is late paying that would reflect on the authorized user also.

Traditionally, authorized user accounts have been used when spouses add one another to their already established credit accounts or parents add their children to their accounts. In recent years, companies have emerged that offer authorized user accounts for a price.

Basically the primary account holder would allow a limited number of unknown authorized users to be added to their good credit accounts and the company would pay the primary account holder a fee for brokering these deals.

Kind of like “renting” out your good credit for a limited term and getting paid for it. The auhtorized user would not actually get use of the credit account; however they ould get the benefits of the primary account holder’s good credit history.

The authorized user would be added for a short period of time in order to add a quick boost to their credit scores. Some of these accounts would be more than 20 years old with excellent payment history and very low balances, something FICO scoring looks kindly upon. According to Fair Isaac Corporation, there are more than 50 million authorized user account holders.

The industry of purchasing authorized user accounts began to get attention and in response to the growing use of authorized user or piggyback accounts Fair Isaac Corporation developed a new scoring model that did not include authorized user accounts in the scoring model.

FICO 08 was to begin some time in 2008 and all the major credit bureaus were to begin using the new scoring model. However, critics have expressed that FICO 08 would be in violation of the Equal Credit Opportunity Act which requires lenders to consider a spouse’s credit history when determining the credit risk of a borrower. Utilizing FICO 08 would prohibit lenders from complying with the Equal Credit Opportunity Act.

Fair Isaac Corporation has since revised FICO 08 to include the use of authorized user accounts; however, they now say it has a way to recognize the abuse of authorized user accounts. Stay tuned for further develops, but for now, it looks as though authorized user and piggyback credit is still a viable option in boosting credit scores. Know where you stand and get your credit score to see if your credit score could use a boost with authorized user credit.