This Looks Like a Really Bad Idea

The practice of people “renting” their credit history (HT The Big Picture via Techdirt) to someone whose own score needs a boost is apparently growing:

….. federal and state authorities fear that some borrowers are turning to a fast-growing business on the Internet: companies that claim to boost credit scores by transplanting the credit DNA of people with excellent payment histories into the credit files of people with subpar histories — ostensibly without breaking any law.

The companies claim to raise FICO credit scores by 50 to 250 points by adding low-scoring borrowers as “authorized users” on the credit card accounts of people with FICO scores well in excess of 700. The positive payment information from such cardholders then flows into the files of the persons 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. For example, a parent might add a son or daughter onto a Visa card in order to provide access to credit for the child or for use in emergencies.

Federal law, however, does not limit the number or prescribe the type of authorized users permitted on any single account. Nor does it prohibit the rental or sale of authorized user designations. Exploiting that loophole, numerous companies have popped up on the Internet offering to buy and rent out the credit card “trade lines” or accounts of credit card holders with high limits combined with perfect payment histories.

Big bucks — and a strong potential for fraud on mortgage applications — are involved.

So, I would think, is big financial exposure to identity theft (or outright) that could dwarf whatever income might be “earned” by the people with the high credit scores.

This deserves more scrutiny, so, as they say, “developing….”