Grad may lose ground in new credit formula

Monday, August 27, 2007

By SANDRA BLOCK
Gannett News Service

You're a recent college graduate, and unlike many of your classmates, you have got no recognition card debt. In fact, you scrupulously avoided using recognition card game while in college. Now, it's clock to confront the stone-cold reality of the recognition world: Because you haven't borrowed any money, you have got got no recognition history. Which intends you'll pay more than for credit, if you can acquire it at all.

For years, grownups with limited or blemished recognition histories have got avoided this job by having person with good recognition -- usually a parent or partner -- add them as an authorised user for one of their cards. Once you're an authorised user, the recognition card holder's payment history looks on your recognition report.

If the card holder have leading credit, being an authorised user will hike your ain recognition score, which loaners utilize to measure the likeliness that you'll refund your debts. But this cutoff to good recognition is about to end.

Carnival Isaac, developer of the widely used FICO score, programs to revolve out a new scoring expression that volition no longer acknowledge authorized user accounts. Carnival Isaac states the alterations are intended to forestall recognition fix companies from exploiting authorized user accounts.

In a pattern known as piggybacking, these companies set up for people with good recognition to "rent" their recognition histories to consumers who desire to hike their recognition scores.

One of the three recognition bureaus -- Experian, Equifax or TransUnion -- will follow the new scoring theoretical account in September, states Bokkos Totaro, frailty president of Global Marking Solutions for Carnival Isaac. He wouldn't place which one. The remaining two recognition bureaus will follow the new scoring theoretical account by mid-2008, Totaro says.

Once the new scoring theoretical account is adopted, billions of authorised users will see their recognition tons decline, states Toilet Ulzheimer, president of educational services for Credit.com, A Web land site that focuses on consumer credit. Carnival Isaac estimations that 30 percentage of the 165 million consumers with adequate information on their recognition studies to cipher a FICO mark have got an authorised user on their account.

Authorized users with no recognition history of their ain volition see their recognition mark disappear, Ulzheimer says. When these consumers use for credit, he says, they'll probably be rejected.

A new study by Credit.com estimations that 1 percentage of all consumers will no longer measure up for a recognition mark once the alteration takes effect.

While the alteration in Carnival Isaac's scoring theoretical account will stop piggybacking, Ulzheimer states it will also ache legitimate authorised users, mainly immature grownups and married women, who have got used the scheme to construct a solid recognition history.

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