“Seasoned” credit makes your report look better than it really is

The credit report system we have in this country isn’t perfect, but it works pretty well. Lenders send information about their customers to the three main credit bureaus, and they keep track of it and, through some complicated math, turn the results in to a credit score. This score is a quick indicator of how trustworthy a customer might be when it comes to lending them money to buy a car, a house or to issue them a credit card.

The popular FICO credit scoring model ranges from 300 on the low end to 850 on the high end. If your score is high, you can get favorable interest rates on car loans, credit cards or mortgages. If your score is low, you may have to pay more, or borrow from subprime lenders, or you may even be turned down for a loan altogether. This can be a problem if you were all set to take out a mortgage and you suddenly find out you cannot qualify.

Poor credit can be repaired, but there is no legal quick fix. It takes time and diligence. All you have to do is to make sure that you start to pay your bills on time. It’s that simple. After a year or two of timely bill paying, your credit score will increase as you show that you are responsible. Some things, such as unpaid debts or bankruptcy filings, will take longer to erase, however, as they will stay on your credit report for seven years.

Several companies are offering workarounds that claim to be able to increase your score by as much as 250 points in as little as 60 days! How is that possible? 

It isn’t well known, but if you sign up as a cosigner on a credit card account of someone else, your own score will be affected by that status. The companies that offer such dramatic increases have established a “network” of people with very high credit who are, for a price, willing to allow total strangers to put their names on their accounts as cosigners. This adds “seasoned” credit to the cosigner’s report.  The fees charged by one credit repair company range anywhere from $1000-5000, depending on how many credit lines the customer wishes to “borrow.” A portion of the fee is passed on by the company to those people who allow their good credit to be used in this way. Once their scores increase, former customers are then encouraged to join the “network” in order to share their newly improved credit.

Is this legal? It is certainly legal for anyone to add anyone else to their credit card as a cosigner. Men and women add their spouses to their accounts all the time. But there is a tremendous difference between doing so to make it convenient for your wife to use your Visa card and doing so in order to allow a perfect stranger to qualify for a mortgage for which he or she otherwise wouldn’t qualify. The lenders may be fooled, and if they are then they are risking a loan to someone who may not repay it.

When done for that reason, adding someone as a cosigner is credit report fraud. Companies that do this tend to come and go as the authorities catch up with them. They then turn up again later under different names. Enrolling in such a plan is not a good idea, and we strongly discourage anyone from doing so.

Copyright © 2005-2007 by Retro Marketing. All rights reserved.