Want to Buy a Better Credit Score?
Frighteningly, you can.
Companies are selling or renting access to improved credit by adding low-scoring borrowers as authorized users of credit cards belonging to those with stellar credit, reports a syndicated real estate columnist.
When your credit scores don’t qualify you for the home mortgage you want, where do you turn? Kenneth Harney notes that it’s an especially timely question now, as banks and mortgage companies tighten underwriting standards.
But authorities fear that borrowers are turning to a fast-growing business on the Internet: companies claiming to boost credit scores by transplanting “credit DNA” of people with excellent payment histories into the files of people with sub-par histories - and ostensibly, without breaking any law.
The companies claim to raise one’s FICO credit score by 50-250 points by adding low-scoring borrowers as “authorized users” on the credit card accounts of people with FICO scores well in excess of 700.
The positive payment information from such cardholders then flows into the files of the mortgage applicant with subpar credit.
Federal law permits authorized users to be added to credit card accounts. Typically the users are relatives or friends of the primary cardholder.
For example, a parent might add a son or daughter onto a Visa card in order to provide access to credit for the child or for use in emergencies.
Yet Federal law does not limit the number or prescribe the type of authorized users permitted on any single account. Nor does it prohibit the rental or sale of authorized user designations.
Exploiting that loophole, numerous companies have popped up on the Internet offering to buy and rent out the credit card “trade lines” or accounts of credit card holders with high limits and perfect payment histories.
Big bucks - and a strong potential for fraud on mortgage applications - are involved. Some website promoters say they can add 80-120 users onto a high-quality account before a bank or mortgage lender gets suspicious.
Each account can rent for as much as $1,500 to $2,000 for a 180-day usage. The primary credit card holder receives a piece of the rental fee, often hundreds of dollars for each authorized user added to the account.
The person seeking a higher credit score does not obtain actual access to the credit card. But within 30-90 days of being added to the account, the national credit bureaus incorporate the primary cardholder’s ongoing account information into the files of the authorized user.
The score-raising attributes of the primary cardholder’s stellar payment record then flow through to the new user, thus allowing them to potentially qualify them for a home loan they might not normally be able to secure.
One company based in Tampa, Fla., recently solicited home mortgage brokers promising FICO score boosts of 150-205 points for applicants “in as little as 30 days” for the “discounted” price of $750 per trade line.
That wide pitch prompted one state financial regulator to issue a “fraud alert” and releasing the following warning:
“Consumers, mortgage brokers and home loan lenders that complete, submit or participate in the completion and submission of an application for credit that contains misrepresentations or false information are subject to administrative actions and potential criminal penalties by the state.”
The Nevada Mortgage Lending Division termed inflating FICO scores through such additions of authorized accounts “deceptive” because it makes applicants appear to be more credit worthy than they actually are.
Mortgage lenders might grant them lower interest rates and lower fees than they otherwise could obtain. Some sites advertise and price high-quality credit card trade lines on the basis of their credit limits and time on the account.
Asked for comment on the rental of trade lines to artificially inflate FICO scores, Steven Baker, Midwest director for the Federal Trade Commission, said only: “We are aware of it. We are concerned about it, and we are looking into it.”
SOURCE: Minneapolis Star-Tribune