Fair Isaac Corp. is tweaking the newest version of the FICO score so that, like earlier versions, it will consider "authorized user" accounts, saying lenders asked it to do so for compliance reasons.
However, the Minneapolis company says that as modified, FICO 08 will boost the scores of those listed as authorized users of others' credit card accounts by a much smaller amount than older versions of FICO.
In those versions, being an authorized user of an account held by someone with a better payment history could raise a person's score by as much as 400 points. Traditionally, authorized users have been family members with less financial wherewithal than the account holders, who allowed them to make charges using their cards. In recent years, a cottage industry of "credit repair" Web sites has sprung up, charging people with poor credit to arrange for them to be listed as authorized users on accounts held by others. Generally, the account holders get a cut of the fee, and the people whose scores are boosted do not get cards.
To thwart this practice, also known as "credit renting" or "piggybacking," Fair Isaac decided last year to leave authorized users out of FICO 08, the fifth version of the market's predominant credit score since 1989.
Tom Quinn, Fair Isaac's vice president of global scoring, said Friday that several banks subsequently notified his company that they had relied on FICO to meet the Equal Credit Opportunity Act's requirement that lenders consider the credit of a spouse when evaluating creditworthiness.
"Some banks were saying they use FICO to meet that regulatory obligation," Mr. Quinn said. "They were basically telling us that, if we brought the new version to market and it didn't include authorized users, they wouldn't use it because they would have to work around it."
Fair Isaac originally expected FICO 08 to be available to the three major credit bureaus early this year. To accommodate the addition of authorized user information, the rollout will take a few more months, Mr. Quinn said.
With the adjustments, "the technology is reducing drastically the ability of someone to manipulate the score while lowering the impact of authorized users," he said. But the potential for such abuse remains, he said, because there is no way of knowing whether an authorized user is a family member or a stranger introduced to the account holder by a third party.
Barrett Burns, the president and chief executive of VantageScore Solutions LLC, a joint venture of the three major bureaus that sells an alternative to FICO scores, said lenders would not comply "to any lesser degree" by using a scoring model "that does not include authorized user information."
VantageScore, introduced two years ago, has never considered authorized users because it was designed to assess "the true credit risk" of an applicant and not that of a borrower "with whom the authorized tradeline is associated," Mr. Burns said.
Mr. Quinn said that as many as 50 million authorized users have a "legitimate reason" for attaching themselves to the credit of another person, usually their spouse, and that the adjustments to FICO 08 will have the unintended effect of limiting the ability of such people to increase their scores.
"The intent of the authorized user was to help family members establish credit," he said, and "in today's world 'family' can mean a lot of things."
