Lenders Eager for FICO to Squash Piggyback Play on Scores.

Washington-Some have voiced concern that Fair Isaac's lengthy timeframe for updating its models for each of the three credit repositories - Equifax, Experian and TransUnion - has the potential to create a credit-scoring "Tower of Babel" as Fair Isaac eliminates "authorized users" of credit cards from the new FICO scores.

The move comes in the wake of widespread concern over credit-boosting services that allow borrowers with no or impaired credit histories to improve their scores by becoming authorized users of someone else's credit card history.

"Our members have been talking about the issue for quite some time," MBA senior director of government affairs Corey Carlisle told Mortgage Servicing News. Noting that the rival VantageScore does not allow this so-called piggybacking, he said, "We are very pleased that Fair Isaac has made an announcement that they are no longer going to allow authorized user accounts." He cited instances where a single Visa or American Express card reportedly had 90 or more users on that card to bolster their credit.

"Our members are telling us this is mortgage fraud," he said. While lenders have no objection to a parent putting a son our daughter on a card to help them establish credit, he said, "Criminals are exploiting a situation that was very innocuous. The challenge is to maintain a legitimate business purpose and still get an accurate credit profile on an individual taking out a loan. "We are talking with anyone who will listen, the FDC, the FBI. We haven't seen any prosecutions," Mr. Carlisle stated.

Earlier this month, Minneapolis-based Fair Isaac said that it will adjust its FICO scoring formula to remove authorized-user accounts from consideration by the scoring model in FICO 08 to protect lenders from abuse of authorized-user credit card accounts by services that sell consumer credit card histories to credit applicants "in order to purposefully misrepresent the applicants' own credit history to lenders and other businesses."

Changing the algorithms Fair Isaac uses to account for the data and methodologies of the three credit repositories are a daunting task that normally takes 12 to 18 months for each repository, said Fair Isaac's MyFicoScore manager Craig Watts from Fair Isaac's San Raphael, Calif., office. "They don't even keep the same categories of information," he noted. "Adapting the FICO score ...