New Credit Scoring Formula Will Make Things Stickier

Say goodbye to piggybacking credit histories. Fair Isaac, the developer of the FICO score, has announced plans to implement a new scoring algorithm that will no longer take into account the practice known as piggybacking. This is when someone with people with great credit histories "rent" their credit history to others who need some seasoned credit on their files to boost their own scores. This is done by adding the credit seekers as authorized users on their cards, which in the eyes of the credit bureaus gave you more seasoned, better rated credit, thus resulting in better scores for the applicant.

This has been used in the past by individuals with either no credit of their own, or a spot or two, to create a history that would enable them to procure credit. Students just out of school who didn't ring up huge credit card bills while there often would have their parents add them to an account; no more. Starting in September one of the big three credit bureaus, Experian, TransUnion or Equifax (no one knows which one yet) will start this new practice, with the others joining ranks sometime in mid-2008. For more ideas on how you can build good credit without this practice, read Sandra Block's article in USA Today. She shares some good ideas!