Apex Credit Services, LLC Proven Right About FICO 08’
Press Release
Source: Fair Isaac Corporation
Fair Isaac Innovation Will Restore Authorized User Accounts to Calculation of FICO 08 Scores
Thursday July 31, 1:53 pm ET
In a prepared testimony, Tom Quinn, Vice President of Global Scoring Solutions for Fair Isaac Corporation states:
"After consulting with the Federal Reserve Board and the Federal Trade Commission earlier this year, Fair Isaac has decided to include consideration of authorized user tradelines present on the credit report in the FICO 08 model."
Fair Isaac (FICO)
Fair Isaac (hereinafter, “FICO”) is the company which designs and implements the most universally accepted scoring model used today. It is commonly known as the FICO score. Today, the three major credit reporting agencies, Equifax, Experian, and Trans Union, permit FICO to apply models to their data which all consider “authorized user” accounts. These models are many but, are referred to as a Beacon, Emperica, or a Classic score depending upon the credit reporting agency to which it is applied.
With that said and no matter the name given, these models are in compliance with the Equal Credit Opportunity Act (hereinafter, the “ECOA”), enumerated in the United States Code at 15 U.S.C. 1691 et seq. The legislative intent and stated purpose of the ECOA was and remains in force to protect consumers from discriminatory and unethical practices in lending.
Nevertheless, FICO proposed in June of 2007 a new scoring model which would completely disregard authorized user accounts. One credit reporting agency was allegedly set to begin using this model in September of 2007. Which one is still unknown however, it never happened. No credit reporting agency has issued a statement to this effect and Equifax has recently stated that they will not allow FICO to apply this model to their data. The other two credit reporting agencies are set to review the model at some point in 2008 however, each and every request as to whether any credit reporting agency is going to permit this model to be applied to their data is garnering a more tenuous and ambiguous response notwithstanding Equifax which has explicitly conveyed a resounding no.
Let us be clear, this proposed model is illegal pursuant to the ECOA. One can review the following pertinent provision of the aforementioned Act and find this to be true:
(6) Credit history. To the extent that a creditor considers credit history in evaluating the creditworthiness of similarly qualified applicants for a similar type and amount of credit, in evaluating an applicant's creditworthiness a creditor shall consider: (i) The credit history, when available, of accounts designated as accounts that the applicant and the applicant's spouse are permitted to use . . .
As anyone can discern, the law clearly states that "any" account which an applicant is permitted to use must be considered. This certainly envelopes authorized user accounts. With that in mind, it is only reasonable to forecast a windfall of class litigation that very well may affect Fair Isaac’s, the credit reporting agencies, and anyone who uses that method bottom lines. This is why only one credit reporting agency was set to implement the changed model in September. Again, it didn't happen and now, Equifax is even unwilling to sit back and wait for the fallout.
This new model was projected to adversely affect 41 million Americans with respect to their credit scores. The reasons given for the so-called need for this change are many but, they are in essence a call for relief from the mortgage industry. After the sub-prime mortgage industry fell through the bottom, the aforesaid industry needed an explanation for their shareholders. Rather than admit to the truth which was that they were approving applicants with 520 mid-scores at 100% financing and nearly at 60% DTI, they blamed a small niche of consumers who knew how to operate shrewdly under FICO models to increase their scores legally.
Presuming that any credit reporting agency proceeds as once planned and fails to see any temporary restraining orders or declaratory actions, the new model would have virtually no effect on consumers. This is because most mortgage and automobile lenders, even some credit card issuers, rely on the middle of the three scores. Consumers will continue to reap the benefit of authorized user accounts on two reporting agencies even if one credit reporting agency would give it a trial run. Again, only Experian and Trans Union have said that they are even willing to review the new FICO 08’ at some point in 2008. They have not said they will use it and we are cautiously optimistic that they will follow the ECOA and decline to do so.
With all this said and assuming arguendo that they would enact the change; it wouldn't affect most consumers until and "if" they apply the change in a retroactive nature. This has not been made clear. Moreover, the bigger question is what creditor would adopt using FICO 08' given the enormous potential for civil liability in a class context. The obvious answer is not many. It just doesn't make sense from a legal or business perspective. This is why FICO 08' has yet to happen.
In all honesty, we at Apex Credit Services, LLC cannot envision FICO 08’ moving forward as proposed in light of its illegality and as such, we will continue to offer our account tradelines in the spirit of the ECOA.
The Above Was Written By Apex Credit Services, LLC a year prior to Fair Isaac’s decision that it must score Authorized User tradelines. For all your legal seasoned tradeline needs, contact the reputable providers at Apex Credit Services, LLC or 888-727-4815.
