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Thu 14 Jun, 2007 02:00 pm
This is from a story yesterday on NPR.
I'd never heard of such a thing, and would be scared to death to do it.
Good-Credit Holders Lend Their Histories for Cash
by Libby Lewis
All Things Considered, June 13, 2007 ยท Do you have good credit ?- and want to earn a little cash on the side? Why not rent your credit history to iffy borrowers, for a fee?
That's what some Americans have been doing, for a good profit. A cottage industry of credit-for-rent companies has sprung up to pair would-be borrowers with people who have good credit to spare.
Federal regulators are investigating the practice, but they haven't banned it. And the private market is showing signs that it may correct itself. In the meantime, both the credit-borrowers and the credit-lenders are profiting.
Brian Kinney spent 20 years in the Army. Now, he sells insurance in California. But he has another source of income: He rents out his good credit history on two old Citibank credit cards. He says he makes about $2,500 a month on the transactions.
He brokers his credit history to people with bad credit through Instant Credit Builders. People pay hundreds of dollars or more to piggyback on his good record, and each time they do, he gets $100 to $150.
This is how it works: Kinney lists the people with bad credit as "authorized users" on those two Citibank cards. When they become authorized users, Kinney's good credit record becomes a part of their own credit score - so they might get a loan they otherwise wouldn't qualify for, or a lower interest rate.
Kinney gets the names and social security numbers of would-be borrowers from Instant Credit Builders and then calls Citibank to change the names of the authorized users on each card.
"If they have my 1985 card, what shows up on their credit report is XXXX and maybe the last four digits of the credit card, so it's partial information ?- not enough that they can go out and do some shopping," Kinney says.
Why would Citibank allow Kinney to cycle authorized users on and off his cards? Citibank officials declined to be recorded for this story, but they sent a written statement indicating that Citibank "doesn't condone this type of customer activity" and is "engaged with multiple partners to discuss specific remedies."
But is it fraud?
"It's not fraud ?- it's a loophole in the system," says Craig Focardi, a credit scoring expert with Tower Group.
He says "authorized users" on a credit account used to be mostly family members. But in the past year or so, companies like Instant Credit Builders have popped up. The companies figured out that those authorized user slots are valuable to people with bad credit.
Instant Credit Builders declined to be recorded for this story. Brian Loving, an employee there, said the business is legal, and the company is just trying to help borrowers who need a break.
But Ginny Ferguson with the National Association of Mortgage Brokers calls "credit for rent" outright fraud ?- even if no one else says so. Ferguson's group has a vested interest in the issue: After all, mortgage brokers sign contracts with lenders.
"If we are found to have helped the consumer to commit fraud, we have to buy that loan back," Ferguson says. "So we're not in this just to shuffle a bunch of bad paper off to the people we are the front-line originators for."
Lately, the credit world has been clamoring for change.
In September, Fair Isaac, the company that created the FICO credit rating score, will stop considering authorized user accounts as a factor in its credit scoring.
Officials from Fair Isaac say they hope that the change will curb credit-for-rent transactions.
So......um... Hey, chai..
ya got a second?
I need a new car..
I haven't seen or heard that one before. I wouldn't rent out my credit history to anyone not even for profit.
I did not work that hard for my credit to loan it out.
I heard the same story and, to be honest, I think it's perfectly fair. We're just playing by the rules they gave us when they started consolidating our personal information and charging us to look at it.
But they're just "authorized users" on your credit card, so that your credit card will show on their bureau? And they can't possibly use your card? What's the risk to the credit card holder?
I can't believe someone would pay hundreds of dollars to have a good credit card rating on their report. Loans I can understand. You'd think they'd pay hundreds of dollars to, I don't know...PAY THEIR F'N BILLS?
But, doesn't this mean that your credit history is tied to their SS # as well? How does it help one without hurting the other?
No, it doesn't. You're not on any of their loans or credit cards so they're stuff won't show on yours. But your card will show up on their report and boost their score.
FreeDuck wrote:I heard the same story and, to be honest, I think it's perfectly fair. We're just playing by the rules they gave us when they started consolidating our personal information and charging us to look at it.
I don't have to pay to see my credit report. You must live in a state that doesn't have that law then.
No, we have the one (or two) free ones a year law, but if you remember, it wasn't always that way.
Wow...they charge people about $1000 per "line of credit," or credit card to show on their report.
As an A2K special, I will allow you to piggyback my two credit cards at a discounted rate of $900 each.
Here's what I don't understand: according to the site, most client's credit scores are in the 600's. I'm guessing in the 600-640 range, which can be very borderline credit(can be decent credit in some cases though). So these people are dropping a couple grand to have extra revolving credit show on their report to bump them to "A" credit, which is typically 670+. Wouldn't that money they're spending be better off paying off their debt? There was an example where the client put the fee of a couple grand....on his credit card. Smart move buddy.
FreeDuck wrote:No, we have the one (or two) free ones a year law, but if you remember, it wasn't always that way.
No, it wasn't always that way and yes I do remember.
FreeDuck wrote:I heard the same story and, to be honest, I think it's perfectly fair. We're just playing by the rules they gave us when they started consolidating our personal information and charging us to look at it.
I just think it's risky. Like slappy said, they don't get your credit card number or anything, but still....it seems like someone might be able to get additional info on you that way.
Yeah, what Bella said about not wanting to "loan" your credit out. Sure, $2500 a month sounds inviting, but I think somehow it could end up biting you.
As far as fair, well, it's legal (at this time). I wouldn't want to be a lender who gets stuck with a band payor because they were able to get the loan on false pretenses, by using a complete strangers credit history.
I don't know how the credit card industry could stop you from making someone an authorized user though.
I think I just created another source of income for Slappy.
Chai wrote:I think I just created another source of income for Slappy.
Eh...it does kind of make sense, but I know from experience how quickly my credit can get f*cked up, how long it takes to fix it, and now how valuable my 7xx score is.
I could see helping out friends this way...for a small fee of course.
But I like money. I'll keep researching it, then I'll decide not to do it.
Chai wrote:
Yeah, what Bella said about not wanting to "loan" your credit out. Sure, $2500 a month sounds inviting, but I think somehow it could end up biting you.
I'm just greedy and stuffy that way. I EARNED my credit and don't want you using it!
Re: Cashing in on your good credit
Chai wrote:
In September, Fair Isaac, the company that created the FICO credit rating score, will stop considering authorized user accounts as a factor in its credit scoring.
Officials from Fair Isaac say they hope that the change will curb credit-for-rent transactions.[/i]
You'd better hurry, Slappy, you've only got a few months left.
I, too, heard that story on NPR. I couldn't believe that this is actually legal. I think it's a loophole in the law which will be fixed in due time.
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