Why authorized user accounts can hurt you

By
Mortgage and Lending with National Credit Fixers - Matt Listro

Authorized User accounts are NOT what they use to be. In short, I use to recommend them but not anymore because they really don’t work now. An authorized user (commonly referred to as a piggyback account) is when someone adds you as an authorized user to their credit account. Then your credit report would be updated to show that account with all it’s longstanding positive history. Sounds good right? Well it was good for years but not anymore. The new FICO scoring model has 4 (yes four) scorecards devoted to credit files with authorized user accounts. The credit system has figured out this loop hole and closed it hard.

Let me give you an example of why authorized user accounts do NOT work. In 2009, I helped a young couple fix their credit to buy their first home. Both achieved over 80% success with our service and had over 700 FICO scores. When the husband applied for his mortgage he had a 710 FICO – sounds good right? Well there are two automated underwriting engines (commonly referred to as LP and DU in the mortgage industry) which effectively underwrite all (ok about 99.7%) mortgage loans in the country (yes I said the entire country). Well these two underwriting engines will decline any loan that has an authorized user account regardless of the credit score. My client whose score was 710 was declined because he had an authorized user account. I did not even know he had an authorized user account because it was not discernable on the credit report. No matter how much money he put down or how great his income, the computer would not approve his loan. When his income was entered as $100,000 monthly (yes $1.2 million per year) along with a 90% down payment the computer was still declining his loan, even with his 710 FICO score. The bottom line was that the computer knew his score was “tampered with” by having an authorized user account and would not approve his loan under any circumstances until the authorized user account was removed from his credit profile and then his loan sailed right through the automated underwriting process.

The bottom line is don’t spend money on these companies who want to sell you an authorized user tradeline with a high limit and longstanding history because it will NOT help you build credit or buy a house anymore!

:)

Matt

Toll Free: 888-NCFIXER (623-4937)
Toll Free Fax: 888-FAX-4020 (329-4020)
Local: 860-282-6181
330 Roberts Street Suite 402
East Hartford, CT 06108

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Matt

Toll Free: 888-NCFIXER (623-4937)
Toll Free Fax: 888-FAX-4020 (329-4020)
Local: 860-282-6181
281 Hartford Turnpike Ste 500

Vernon CT 06066

credit repair company

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Rainmaker
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P.J. Virgilio Jr., Realtor 408-568-6578 Selling homes in the Greater San Jose area and South through San Martin, Gilroy
Keller Williams Realty Silicon Valley - Morgan Hill, CA
San Juan Bautista and Hollister as well!

Thanks Matt,

Very interesting post!

Jan 03, 2012 12:31 PM #1
Rainmaker
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Janice Roosevelt
Rory Burkhart Team, Keller Williams - West Chester, PA
OICP ABR, ePRO,Ecobroker

Matt, I had no clue about this. Can you give an example of when someone would add someone else and this appears. Was it the wife on this account? What can be done to eliminate it?

 

Jan 03, 2012 02:04 PM #2
Rainmaker
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Matt Listro
National Credit Fixers - Matt Listro - Vernon, CT
Your Credit Repair Expert

Hi Janice:

Let's say you want to help your daughter establish some credit.  You add her to your Macy's account.  Then next month Macy will report not only to your credit report under your social but now it will report under her as well.  When it updates it will show the account was opened when you opened it (example 2002 - giving her a 10 year history of credit).  Presto - her score jumps!  We use to do this all the time for mortgages back in the 90s and into the 2000s.  It just doesn't work for mortgages any more.  The DU or LP engine will not approve the loan until the authorized user account is removed from the credit report (you call up Macy's and have her removed from the account).  When the account is removed - the score will fall.  You can still use this trick to help you get approved for car loans or other credit cards!

:)

Matt

Jan 03, 2012 02:14 PM #3
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Rainmaker
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Matt Listro

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