Want to Rent or Buy Better Credit?

The scary thing? You can actually do it. Legally.

At least that’s the claim of some companies, who offer to sell or rent access to improved credit by adding low-scoring borrowers as authorized users of credit cards belonging to those with stellar credit.

When your credit scores don’t qualify you for the Florida home loan you were angling for, to whom or what can you turn?

As syndicated columnist Kenneth Harney writes, this is a very timely quandary, as both banks and Florida mortgage companies tighten underwriting standards.

Authorities fear borrowers are turning to a booming business on the web: sites claiming they can boost credit scores by transplanting “credit DNA” of people with excellent payment histories into the files of people with sub-par histories.

And, at least ostensibly, they can do this without breaking any laws.

The companies claim to raise someone’s credit report by boosting their FICO credit score by 50-250 points. How? Adding low-scoring people as “authorized users” on the accounts of people with FICO scores at 700-plus.

The positive information from such cardholders flows into the files of the Florida mortgage applicant with subpar credit.

• Federal law permits authorized users to be added to credit card accounts. Typically the users are relatives or friends of the primary cardholder.
• Federal law does not limit, however, the number - nor does it prescribe the type of authorized users permitted on any single account, or prohibit the rental or sale of authorized user designations.

Exploiting that loophole, numerous companies have popped up on the Internet offering to buy and/or rent credit card “trade lines” or accounts of card holders with high limits and perfect payment histories.

Each account rents for as much as $1,500-2,000 for 180 days of use. The primary credit card holder receives a cut of the fee, often hundreds of dollars for each user added to the account.

The person with credit card debt (and bad credit) does not obtain actual access to the card. But within 30-90 days of being added to the account, the credit bureaus incorporate the ongoing account information into the files of the authorized user.

The score-raising attributes of the primary cardholder’s stellar payment record then flow through to the new user, allowing them to qualify for a Florida home mortgage they might not have be able to get.

One company in Tampa recently solicited Florida mortgage brokers with offers of FICO score boosts of 150-205 points for applicants “in as little as 30 days” for the price of $750 per line.

That wide pitch prompted one state financial regulator to issue a “fraud alert,” and similar warnings will likely follow.

Mortgage lenders might grant them lower Florida mortgage rates and lower fees than they otherwise would. That’s not likely to sit well, especially given the recent uncertainty engulfing the business.

Steven Baker, Midwest director for the FTC, said of the matter: “We are aware of it. We are concerned about it, and we are looking into it.”

SOURCE: Minneapolis Star-Tribune