Fair Isaac Corp., Minneapolis, will adjust its FICO scoring formula to ensure the continued reliability and predictive power of FICO scores.
This decision, announced Tuesday, is meant to protect lenders and FICO scores from abuse of authorized user credit card accounts by a new kind of credit repair service that sells consumer credit card histories to credit applicants in order to purposefully misrepresent the applicants’ own credit history to lenders and other businesses.
The adjustment removes authorized user accounts from consideration by the scoring model in FICO 08, the newest version of the credit score that Fair Isaac expects to make available to lenders starting in September.
“We will do whatever it takes to protect the reliability and accuracy of FICO credit scores for lenders, and to ensure lenders can continue to use FICO scores with confidence when making their most important customer decisions,” said Fair Isaac CEO Mark Greene. “We will continue working with lenders, regulators and others in the credit reporting industry to end deceptive practices that fraudulently misrepresent consumer credit histories for profit.”
An authorized user is a person permitted by a credit account holder to use an account, typically a family member who is managing credit for the first time. Used legitimately, authorized user account information has helped both lenders and consumers by enabling lenders to use FICO scores when making credit decisions for consumers who are starting to establish a credit history. Fair Isaac’s research indicates that the next version of its FICO scoring formula will deliver increased predictive power without considering authorized user accounts.
Cource – Credit & Collections World