Bad Credit? Rent A Credit Card!
Consumers can rent cars, apartments, even golf clubs. But credit cards?
A small but growing industry of Internet-based credit repair companies are offering to help people boost their credit scores by adding their names to credit card accounts that have clean records. For several hundred to thousands of dollars, the websites promise to quickly raise scores as much as 200 points, enough to qualify for a loan or obtain a lower interest rate.
While legal, the practice of renting “authorized user” status is a growing concern for lenders who rely on credit scores such as FICO to determine the odds that a borrower will repay loan.
One president of a mortgage company said he is working with credit bureaus to review their databases and compare credit scores with and without allowing authorized users on credit cards. If there is a big disparity, that’s trouble, he said. In one case, a single Discover card had 1,800 authorized users.
What do the cardholders get for letting other people be listed as authorized users? A 25 percent commission.
Fair Isaac could simply exclude authorized user accounts from the FICO system. But that would hurt many people, including students and divorcees, who need that status to establish credit.
It would be a very bad thing for consumers if lenders force Fair Isaac to turn off their credit lines.