We have all heard of companies claiming to be able to help boost a person’s credit score within a short period of time and have dismissed them as scams. It turns out, however, that there are a few companies out there that are successfully doing just that – though how long they will be allowed to legally operate remains to be seen.
It seems the companies are able to convince individuals with a solid credit rating to “rent out” authorized user slots on their credit cards. After the card has been added to the person’s credit report and has successfully given his score a boost, it is removed from the person’s report. The benefits gained from the temporary authorization, however, remain on the report.
Making repairs to your credit in this manner doesn’t come cheap. One such company charges $900 for the first card to add to your report and offers additional cards for a slightly discounted price. The results of these purchases will vary according to what is already on your report, but renting one card can increase a score by 30 to 45 points, while two cards will earn a 60 to 90 point improvement and three will result in anywhere from 150 to 205 points. This is because the computers used to calculate credit scores see these new accounts as credit cards with a strong repayment history.
According to some reports, those “renting” authorization to their credit cards can make a pretty decent income with the practice. The credit repair companies typically pay anywhere from $100 to $150 each time a slot is rented. One card holder participating in such a program claims to earn about $2,500 per month by renting out 19 “authorized user” slots.
Of course, going this route to repair your credit does have its risks. While you may think the person renting out his card is taking a risk, the opposite is actually true. The person renting the card never receives the card holder’s account information, but the person renting the card does get a hold of some sensitive information. Since the card holder must personally call and add the person as an authorized user, the person looking to boost his or her credit score must give out his or her social security number. In addition, the card holder may begin receiving mail, such as credit card applications, in the name of the “authorized user.” This, of course, puts that person at risk for identity fraud.
Lending companies are looking into ways to stop this practice and many consider it to be fraud. Mortgage companies, for example, specifically ask if there is any information that needs to be disclosed regarding the person’s credit history. By bumping up a score in such a questionable manner, some consider the practice to be fraud. To date, the practice has not been found to be illegal, but Fair Isaac Corp, which developed the FICO score, is looking into ways to close this loophole.
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