Still a Bad Time to Buy Authorized Tradeline Services

I've received a couple calls from consumers this week asking about the "delay" in rolling out the new FICO credit score model. The updated FICO formula is designed to ignore authorized user accounts in score calculations and was officially launched in September. Read our whole alert on the FICO change online. Here's the scoop:

The roll-out of the new score was planned to take a few months. The credit bureau, Experian, was the first to implement the score in September. Individual banks, lenders and other credit agencies are converting between now and 2008.

There has recently been a hitch in this plan, though. The aforementioned delay was reported by American Banker on Friday (paid subscription required). It all began last year when Fair Isaac (maker of FICO scores) sued the three credit bureaus for unfair and anticompetitive practices relating to the release of the VantageScore.  According to the American Banker article, Equifax will not implement the new FICO score while the case is pending:

"Until that lawsuit is resolved, our relationship with Fair Isaac is strained," Paul J. Springman, Equifax's chief marketing officer, said last week. "Whenever we take care of the lawsuit, then we decide what to do with FICO 08."

All this sounds more like something from a soap opera than the business pages. Especially, when you consider that Equifax and FICO used to have a very strong partnership.

In the meantime, all those formerly shut-down authorized tradeline (aka Piggybacking) companies are back at it. Fueled by the news of possible delays, they've been marketing their authorized user accounts with a renewed fervor.  For a $500 to $2,500 price tag, a consumer can pay to be added as an authorized user on a stranger's credit card account.

Despite FICO roll-out delays, authorized user accounts are not likely to be counted in credit scores. Most lenders and credit score users have figured out the scam and adjusted their  models accordingly.  Buying an authorized tradeline is a gamble at best and most-likely a huge waste of money. There is no "grandfathering" of these authorized accounts. Even if they do manage to get you a score boost now, the increase will disappear once everyone converts to the new scoring formula.

Instead, someone struggling to rebuild their credit should apply that $500+ investment toward opening a secured credit card. With secured credit cards, you deposit a balance into a savings account to "secure" your credit limit on the card. A $500 savings account gets you a $500 credit limit. The card will report to the bureaus each month under your name. If you use the account responsibly, the creditor will convert the card to an unsecured account and you'll receive your deposit back with interest. Plus, there is no danger of this account being ignored in credit score calculations.

If you're considering working with an authorized tradeline company, I hope this information helps you make a smart decision. If you have any questions, feel free to email us at tidbits@credit.com.

Emily Davidson – Credit.com's Communication Director and former TransUnion credit expert. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.

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