If you are an authorized user on someone’s credit account, be aware because the FICO rules are changing. You could end up with worse credit than before. Fair Isaac announced on June 5 that it is going to remove authorized user accounts this September from one of the three credit bureaus – Equifax, Experian and TransUnion – but have not disclosed which one. The remaining two will follow sometime in 2008 thereby eradicating the use of borrowed credit for the new scoring model, FICO 08. In order to protect lenders and FICO scores from potential borrowers from using others’ good credit to obtain loans. Some people were abusing authorized user accounts by “renting” their good credit out to others who had very poor credit by adding them to their accounts.

Authorized users are allowed to benefit from primary users’ credit limits and balances without the obligation of paying the bills. This also means that if you have good credit and add a spouse, child or grandchild to your 30-year-old credit card, he or she reaps the benefits of that 30-year card – the balance and limit ratio. Let’s say there are no delinquencies on this card. The authorized user would have an increased credit score because FICO treats authorized users as if the card had been his or hers for the last 30 years. However, only authorized users that have their social security numbers on the account are able to use the good or bad credit of the primary user. Authorized user accounts were a good way for parents, grandparents and spouses to help build the credit of their loved ones without them having to worry about paying. Unfortunately, those who were accepting money for use of their good credit have made it difficult for new credit users to obtain good credit fast.

The majority of authorized users are spouses, children and grandchildren. The problem that will arise with authorized user accounts being taken off from the credit scoring model is that the credit of these people will drop drastically or not have sufficient information in their credit folders to even have a FICO score. The best thing for these people to due is to apply for their own credit card and start building good credit the old fashioned way.