FICO credit score drops authorized
Andre Littesy of Raleigh, N.C., says he and his wife
added his daughter, a college student entering her senior year,
to their credit cards as an authorized user. Their daughter previously
tried to get her own credit card at Bank of America but she was
denied because she had a thin credit file consisting only of student
"I want her to walk out of college established to where she
can press on and won't need a co-signer to buy a car or rent an
apartment," says Littesy.
He says Fair Isaac's decision won't affect him or his daughter,
who currently has a FICO credit score above 700.
"She currently has credit cards in her name, but that couldn't
have been done without the authorized user."
He says he feels for parents who will have to deal with the new
FICO credit score.
"I just can see parents trying to get their daughter or son
financially established in college but they won't, and their child
will walk out with only student loans on their credit file,"
Watts says the company hasn't done anything that will affect the
ability of parents to teach good credit habits.
"The FICO score will look at everything on a
credit report except the authorized users account," he says.
"All we've done is removed one factor."
Curtis Arnold, founder of U.S. Citizens for Fair Credit
Card Terms Inc. and Cardratings.com, a site for credit card information,
says he's not sure if authorized users is a very good teaching tool.
"What good is it going to do? What's that teaching the child?"
he asks. "You're giving them instant access and an instant
credit score and that could lead to financial disasters such as
the child going out getting a bunch of credit in their own name.
I'm a firm believer that if you earn something yourself it's a much
more valuable teaching tool."
Arnold doesn't oppose the FICO change and suggest that consumers
wanting to help loved ones improve credit, such as parents, look
into secured credit cards. The cards, he says, are generally reported
to all three major credit bureaus.
He adds parents can help their child in high school
by giving them what he calls "credit-card-training-on-wheels,"
which are prepaid credit cards. He suggests parents examine the
fees on the cards before providing them to their children.
This is the sixth generation of the FICO credit. Updates are made
based on consumer behavior, Watts says.
The new version is expected to do a better
job of assessing the risk of all consumers, he says, particularly those with
thin credit histories, such as recent immigrants and young adults, consumers who pose high risk to lenders and consumers who are applying
for credit for the first time.
He says the change is not a reaction to anything occurring in the
home lending industry and the process of updating the current formula
began 12 to 18 months ago.