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June 22, 2007
Fair Isaac to Pull the Plug on FICO Score Boosting Schemes for Mortgages
Fair Isaac Corp. says it will no longer take "authorized user" accounts into consideration when computing FICO scores, starting in September. The move to update the FICO scoring model comes as federal and state regulators have expressed concern to mortgage lenders and brokers about Web sites that allow borrowers with bad credit to "rent" the credit cards of people who have excellent credit histories, in a scheme that boosts their FICO scores by hundreds of points and enables them to qualify for lower financing rates. Although the Web sites are taking advantage of a loophole in the law permitting authorized user accounts, submitting mortgage applications with artificially inflated FICO scores is bank fraud and a violation of a number of other statutes. Fair Isaac believes the new scoring model will address "most of the problem," says public affairs manager Craig Watts.
Posted by S. Germain at June 22, 2007 10:55 AM