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Got good credit and want to make some money?

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Folks with bad credit find an easy way out

By J.W. Elphinstone

THE ASSOCIATED PRESS

06/04/2007

 

Only a low credit score stood between Alipio Estruch and a mortgage to buy a $449,000 Spanish-style house in Weston, Fla., a few miles west of Fort Lauderdale.

 

Instead of spending several years repairing his credit rating, which he said was marred by two forgotten cell phone bills and identity theft, Estruch, 37, a real estate agent, paid $1,800 to an Internet-based company to bump up his score almost overnight.

 

The result was a happy ending for Estruch, but the growing practice is sending shivers through the mortgage industry. Federal regulators are also reviewing the practice. And after being contacted by The Associated Press for this story, Fair Isaac Corp., the developer of the widely used FICO score, said it will change its credit scoring system beginning later this year in a way that it contends will end this little-known but potentially high-impact mortgage loan loophole.

 

Instantcreditbuilders.com, or ICB, helped Estruch boost his score by arranging for him to be added as an authorized user on several credit cards of people with stellar credit who were paid to allow this coattailing. Parents also use this practice when they add their children to their credit cards to help them build solid credit.

 

The pitch to those who are essentially renting their credit history for pay is seductive: You don't need to worry about users of this service receiving duplicate copies of your credit cards, account numbers or any of your personal information. It's essentially free money, they are told.

 

Brian Kinney, 44, a retired Army officer in Glendale, Calif., pulls in more than $2,500 a month by lending out 19 credit card spots on two old Citibank cards with strong payment histories. Kinney, whose FICO score is above 800 on the scale of 300 to 850, quit his job working at a Farmers Insurance agency and uses the ICB income to tide him over until he starts his own insurance agency.

 

But lenders are worried that they're taking on greater default risks by unknowingly offering lower interest rates than they otherwise would to applicants who artificially boost their credit scores. Their trade group has complained to the Federal Trade Commission and is talking with the credit reporting bureaus.

 

Estruch paid $1,800 in December for three credit card spots, and by January, his FICO score jumped from 550 to 715. In mid-March, he closed on his four-bedroom, beige, stucco house after obtaining a 30-year fixed-rate mortgage from a unit of American Home Mortgage Investment Corp. It carried a 7.5 percent interest rate and required no down payment.

 

"Everything now is score-driven. I had a great mortgage history, but I got hurt because of my credit score," said Estruch, who also works as a mortgage broker. He bought and sold two houses previously and currently owns another home in New York. Estruch said he's current on his mortgage payments.

 

Companies such as ICB, based in Largo, Fla., are sprouting on the Internet with little overhead and no-frills marketing.

 

Jason LaBossiere, who founded ICB a year and a half ago, said his company receives 100 to 150 new leads daily — a number that has been growing — and those inquiries lead to 10 to 20 new clients a week.

 

ICB charges $900 for the first credit card account, with a discount for additional ones. The cardholder allowing the piggybacking on his or her credit history can receive $100 to $150 per slot, depending on the age and credit limit of each card. ICB pockets the rest.

 

The effect on a credit score can vary depending on what else is in a client's report. But one borrowed credit card account can increase a score from 30 to 45 points, two from 60 to 90 points, and five from 150 to 205 points, according to ICB. That's because the computer program that calculates scores is essentially tricked into believing the credit renter has a better repayment history when it sees the added accounts, and that helps lift the credit score.

 

Once the credit card company files an updated report to credit bureaus — leading to a higher FICO score — the credit renter is removed from the account of the person allowing the piggybacking. However, the credit card's payment history remains on the authorized user's credit report forever, and lenders have no way of knowing how the credit borrower is related to the cardholder.

 

A higher credit score can save a consumer an enormous amount of money because it usually means a lower mortgage interest rate. It also can mean the difference between qualifying for a loan or not, as in Estruch's case.

 

Kinney, the retired Army officer in California, said those borrowing his good credit history don't get his personal information, full credit card number or credit card expiration dates.

 

Instead of being worried about risks he may be assuming, Kinney said borrowers are the ones vulnerable to scammers posing as do-gooders. Those seeking a credit hike give the cardholder their names and Social Security numbers, which, in the wrong hands, could lead to identity theft.

 

Ginny Ferguson, a mortgage broker in Pleasanton, Calif., and a credit expert for the National Association of Mortgage Brokers, considers the practice mortgage fraud, and the trade organization is about to release a policy statement against it.

 

"These companies are encouraging consumers to commit fraud," she said.

 

ICB's LaBossiere said he sees his business as a second chance for the consumer who has had little financial education to make good decisions.

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there's an article in the journal today about Fair Isaac closing this loophole. I think these companies will soon be out of business.

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Send me a PM if anyone wants me to use their credit card.

 

 

:D

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If this is true, and my wife claims that her sister did this, then I would bet that you don't even need to find someone with great credit. You would just have to find an account that someone has had for a long time and has paid on time. :D

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On a somewhat related issue, I heard that the credit bureaus are now selling info. Let's say you give permission to a mortgage company to pull your CBR . . . the CBRs are selling the fact that a mortgage company pulled your CBR, to other mortgage brokers!

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On a somewhat related issue, I heard that the credit bureaus are now selling info. Let's say you give permission to a mortgage company to pull your CBR . . . the CBRs are selling the fact that a mortgage company pulled your CBR, to other mortgage brokers!

 

I'll bet this is true. I was looking into a mortgage a little while back and since then I am non-stop getting all sorts of mortgage offers. I just pulled a credit report and there are like five different mortgage companies on there. :D I did not ask any of them for credit.

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I'll bet this is true. I was looking into a mortgage a little while back and since then I am non-stop getting all sorts of mortgage offers. I just pulled a credit report and there are like five different mortgage companies on there. :D I did not ask any of them for credit.

 

 

I would think it is unlawful for a CBR to be pulled w/o your permission other than for collection purposes. :D

Edited by Ramhock

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I'll bet this is true. I was looking into a mortgage a little while back and since then I am non-stop getting all sorts of mortgage offers. I just pulled a credit report and there are like five different mortgage companies on there. :D I did not ask any of them for credit.

 

 

 

And be very careful here. Just asking for credit can lower your credit score. My SO has worked in the mortgage business for years and she told me this.

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And be very careful here. Just asking for credit can lower your credit score. My SO has worked in the mortgage business for years and she told me this.

It depends on the frequency, the number of requests, and who requested the inquiry. If an existing credit card company pulls your score to either give you an automatic increase or to evaluate your APR, it doesn't count. Nor does the occasional application for a new credit card, car loan, etc. If you apply every other day for a new credit account, yeah that will hurt you.

 

One exception to this is applying for a mortgage and I believe a vehicle loan. Multiple inquiries within a period of time count as just one inquiry. This allows you to shop around for the best rate for those purchases.

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I did this last year with my Dad. When I tried to refinance my home to get a better rate, I was told that I didn't have enough 'revolving' credit. Although I had plenty of credit, they were mostly 'installment'-type credit lines, like home loans, car loans, etc. Nothing where the balance fluctuates with usage (I paid for most everything with cash and really didn't like the idea of carrying credit cards). So I went to my Dad and he added me to several of his credit cards, and immediately I was given the benefit of his excellent payment history on his revolving accounts.

 

HOWEVER...

 

I have since sold that home and am now trying to purchase another. Although I have excellent payment history on all of my accounts, I am being hit with this little nugget..."due to your amount of monthly debt, you are falling below our debt ratio requirements." Unbelievable! The same revolving credit history that I needed to get approved for my prior refinance is now costing me the chance to get a new loan on a different house. Its very difficult to explain to a loan officer that several of these accounts belong to my Dad and I am not responsible for the payments and I only added this info to my credit report to secure a better loan. In essence, I feel like I am asking for a loan while admitting some sort of mortgage fraud.

 

So be careful what you ask for. The long term effects of that decision may come back to haunt you.

Edited by The Hitter

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It depends on the frequency, the number of requests, and who requested the inquiry. If an existing credit card company pulls your score to either give you an automatic increase or to evaluate your APR, it doesn't count. Nor does the occasional application for a new credit card, car loan, etc. If you apply every other day for a new credit account, yeah that will hurt you.

 

One exception to this is applying for a mortgage and I believe a vehicle loan. Multiple inquiries within a period of time count as just one inquiry. This allows you to shop around for the best rate for those purchases.

 

well, you have to know which company they are tapping into to see your score (equifax, experian, transunion)...

 

if any of these are hit up more than 3x within 6 months....your score likely gets hit...

Edited by Avernus

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On a somewhat related issue, I heard that the credit bureaus are now selling info. Let's say you give permission to a mortgage company to pull your CBR . . . the CBRs are selling the fact that a mortgage company pulled your CBR, to other mortgage brokers!

 

 

 

People can opt out here :

 

Opt Out Prescreen

 

Definitely should be done if you are buying a house. The amount of "firm offers" one gets after a mortgage company checks your credit is unbelievable.

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People can opt out here :

 

Opt Out Prescreen

 

Definitely should be done if you are buying a house. The amount of "firm offers" one gets after a mortgage company checks your credit is unbelievable.

 

 

Yep. My mailbox is full of offers to refi already. :D

 

Bass turd mortgage companies. :D

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The result was a happy ending for Estruch, but the growing practice is sending shivers through the mortgage industry. Federal regulators are also reviewing the practice. And after being contacted by The Associated Press for this story, Fair Isaac Corp., the developer of the widely used FICO score, said it will change its credit scoring system beginning later this year in a way that it contends will end this little-known but potentially high-impact mortgage loan loophole.

 

has anything been done to eliminate this loophole?...I've been thinking about doing this in a couple of months...

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What is the purpose of the FICO score. The things that I have heard, it seems that it is ass backwards. I have never seen my FICO score, I check my credit report three different times a year one from each free. So I guess why did someone need to come up with something new to see if you have good payment history? Just as this article says, it seems that it is easy to manipulate.

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What is the purpose of the FICO score. The things that I have heard, it seems that it is ass backwards. I have never seen my FICO score, I check my credit report three different times a year one from each free. Just as this article says, it seems that it is easy to manipulate.

 

credit lenders and mortgage companies use this to judge how much of a risk you are and what kind of rate to give you...

 

but I'm not exactly sure what you are asking here "So I guess why did someone need to come up with something new to see if you have good payment history?"

 

and I'd like to add that it should be easy to manipulate considering it can take 7+ years of your time to re-build your credit should something unfortunate happen or if you are just uninformed about your FICO score and learn too late...

 

not to mention it's a great way to take advantage of the system if you have A+ credit...

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What is the purpose of the FICO score. The things that I have heard, it seems that it is ass backwards. I have never seen my FICO score, I check my credit report three different times a year one from each free. So I guess why did someone need to come up with something new to see if you have good payment history? Just as this article says, it seems that it is easy to manipulate.

 

Fico scores are set up by the banking industry. Basically to function within the fico system you have to get in and stay in debt. We are told from an erly age that we have to have "good credit" if we want to borrow money. Wrong, many banks underwrtie mortgages regardless of credit scores. This is part of the scam by the credit card companies and their banks to rip us off. I maintain fico scores are the main reason so many americans have such overwhelming debt.

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Fico scores are set up by the banking industry. Basically to function within the fico system you have to get in and stay in debt. We are told from an erly age that we have to have "good credit" if we want to borrow money. Wrong, many banks underwrtie mortgages regardless of credit scores. This is part of the scam by the credit card companies and their banks to rip us off. I maintain fico scores are the main reason so many americans have such overwhelming debt.

 

 

This is basically what I am talking about. I have heard this from others, why is this the process. I have listened to Dave Ramsey on XM the past few weeks, and I know that he is a nut job, but what he is saying makes sense. This FICO business is all screwed up if the above is true.

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This is basically what I am talking about. I have heard this from others, why is this the process. I have listened to Dave Ramsey on XM the past few weeks, and I know that he is a nut job, but what he is saying makes sense. This FICO business is all screwed up if the above is true.

 

Here are some facts..

 

1. If you have a bazillion dollars in the bank and you have had no debt for like 10-15 years you credit score is...............ZERO!!!

 

2. If you have 10 credit cards with 50k available and you have used 25k and make your payments you have a great credit score. If you win powerball and and pay off your credit cards your scores plummets.

 

3. If two identical people have their cards and mortgages maxed out and make their payments they have a better score than the doppleganger who has very little on his cards and has missed one payment in 5 years.

 

Basically it is a system which rewards you for having debt and making your payments. If you were a banker, what would you reward?

 

Dave for Pres and Clark Howard for Veep

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Oh yeah, why do you need a good credit score? So you have the privilege of going farther into debt.

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Here are some facts..

 

1. If you have a bazillion dollars in the bank and you have had no debt for like 10-15 years you credit score is...............ZERO!!!

 

2. If you have 10 credit cards with 50k available and you have used 25k and make your payments you have a great credit score. If you win powerball and and pay off your credit cards your scores plummets.

 

3. If two identical people have their cards and mortgages maxed out and make their payments they have a better score than the doppleganger who has very little on his cards and has missed one payment in 5 years.

 

Basically it is a system which rewards you for having debt and making your payments. If you were a banker, what would you reward?

 

Dave for Pres and Clark Howard for Veep

 

the one thing is when I use the score simulator on equifax.com, it says my score would raise by 40 pts or more if I paid off all my credit cards right now...and I don't have much debt to begin with...

 

and I agree that the system is retarded...but it does affect certain things other than your mortgage....

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Oh yeah, why do you need a good credit score? So you have the privilege of going farther into debt.

 

ahaha :wacko: ....it allows you to act like you have more money than you actually do...

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... when I use the score simulator on equifax.com...

 

I just went to their site to try to find this and was unable to. Can you provide a link directly to it?

 

Do you have to sign up first?

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I just went to their site to try to find this and was unable to. Can you provide a link directly to it?

 

Do you have to sign up first?

 

yeah, you have to get your credit report....it is under the credit score area...

 

it is very helpful in letting you know what to pay off first in order to raise your score faster...

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yeah, you have to get your credit report....it is under the credit score area...

 

it is very helpful in letting you know what to pay off first in order to raise your score faster...

 

Gotcha, thanks

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