Fair Isaac to Change FICO Scoring System to Close Loophole

A couple months ago, I described how some were exploiting a credit scoring loophole for profit. It appears that Fair Isaac, the company that develops the FICO score, has noticed this trend and is moving towards stopping this abuse. As part of its planned overhaul of its credit scoring system in September, Fair Isaac will no longer consider authorized users on an account when calculating a credit score, thus effectively closing the loophole.

While this move should end this abuse of the system, it also has other ramifications. No longer will it be beneficial to add someone with a limited credit history, such as a child or a spouse, as an authorized user to help jumpstart their credit. Overall that is probably a worthwhile tradeoff to make. Lenders must have confidence that the score, which should only reflect an individual’s probability of repaying a debt, is not so easily manipulated.