Authorized User Account Changes with FICO 08 What You Need to Know

Most lenders are already using the FICO 08 scoring model which was released in late 2009.  In this model there were some major changes to how authorized user accounts are scored on a consumer credit report

Authorized user accounts have always been one of the best and fastest ways to add new credit to a report. Someone who has a good standing revolving credit card account adds someone onto the card as an “authorized user” and that person receives credit for that account in their scores.

This has always been a great method to help consumers build their credit scores. This is similar to co-signing in the sense that the authorized user gets credit for the good or bad payments on that account.

It is different than a loan though because the authorized user is not used to APPLY for the account nor is that person responsible for the debt. They simply have access to the credit card and receive credit within their scores for the account being paid as agreed.

If the account has a low balance, good pay history, and longtime reported it can have a major impact on the scores. If the account has negative payments or a high balance, it is typically better that the consumer avoid being put on the account.

The BIG change in FICO 08 is that authorized user accounts will ONLY have a score impact if they stem from an immediate family member. So if a consumer gets added to their parents, grandparents, or siblings’ accounts, there will STILL be the same amount of score increase as in the past.

BUT, there will be NO score increase if the authorized user is NOT an immediate family member. So if a consumer attempts to purchase an authorized user account from someone else or be added to a friend’s account, there will be NO score impact at all.

Being added as an authorized user to a good revolving account is STILL one of the best and fastest methods to spike a credit score.  BUT, make sure your clients know that the original credit holder is a family member to insure the credit scores go up with this new account being added.

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