Data Facts Blog


Data Facts Answers Question About Authorized User Accounts

Question:  “In the past, our mortgage company has encouraged borrowers who have either little credit or are rebuilding their credit to become an authorized user on the account of a spouse, parent, or sibling. Recently, however, we have heard that authorized user accounts are no longer factored into a person’s credit score, and will not help increase a credit score. What is true?  Help!”

Data Facts answers: The designers of the credit scoring formula model (FICO) meant for authorized user accounts to be utilized for a person with good credit and a long credit history to be able to assist their children, spouses, or siblings with their credit history. When an account holder adds another person to their account as an authorized user, that person gets all the benefit of the good payment history. In lots of cases, this dramatically increases a person’s credit score.

Sneaky people began to exploit this practice. Websites popped up selling “piggybacking”. A person with less than stellar credit history could be added to a complete stranger’s credit, and artificially boost his score.  These websites charged thousands of dollars, and paid people with good credit to add dozens of stranger’s names to their credit accounts!

In an attempt to eliminate this practice, the credit score model builders for Fair Isaac originally decided that their new scoring model- FICO 08- would NOT consider authorized user accounts in the formulation of the credit score.

 After further research, however, they reversed this decision. Eliminating authorized user accounts would wipe out millions of consumers’ credit scores who utilize the authorized user status legitimately (they are authorized users on their parents’, spouse’s, children’s, or siblings’ accounts). The model builders decided to allow the authorized user status to still be figured into the credit scores. (Keep in mind the model builders have added additional- although undisclosed- measures that will close the piggybacking loophole).

Allowing authorized users accounts to be figured into the credit score is great news to millions of consumers who maintain that status legitimately. However, if you are an authorized user, try to follow these tidbits of advice:

 – Make sure the main account holder has a good credit history. An authorized user does not need to be on accounts that have just been opened, or accounts with late payments or high balances. The goal is to use the account to boost a credit score. A credit line that is new, paid late, or almost run to the limit will most likely result in the score dropping.

–  Open at least some accounts in your name. While an authorized user designation does figure into the credit score, some lenders remove those accounts from consideration during lending decisions. Consumers should realize it’s risky to rely on authorized user accounts for their entire credit history. It is recommended that consumers be a main or joint borrower on at least a couple of credit lines.

–  Be sure you trust the main account holder. If the main account holder begins paying late or runs up the balance, your credit will be affected (remember, however, an authorized user will not be responsible for the debt).  Make certain the account holder is someone you trust to make good financial decisions before becoming an authorized user on their account.

When employed correctly, the authorized user designation continues to be a helpful tool which consumers can utilize as a boost to their credit history. It is not a long-term solution, and should be used as only one small portion of the credit building plan.

~~Susan McCullah is the Product Development Director for Data Facts, a 23 year old Memphis-based company.  Data Facts provides mortgage product and banking solutions to lenders nationwide. Check our our website for a complete explanation of our services.

Credit Score Success from Scratch; a Simple Recipe

A high credit score is like a homemade meal; it takes time, patience, and cannot be whipped up instantly.  Let’s look at the recipe to build a great credit score from scratch:

First, you need to have the ingredient of credit. People who don’t have any credit are not showing the credit scoring model their financial management skills.  A credit card, home loan, or car note is a main ingredient in the credit score recipe.  Remember: you are not required to carry a credit card balance. Using a credit card will help build your credit even if you pay it in full every month.

Second, make sure you pay a lot of attention. Pay those credit obligations on time, because timely payment is the single most important aspect of building a good credit score.  You can gain lots of points by having a good history of on time payment, and, conversely, you can spoil your credit score with just a few missed or late payment patterns.

Third, keep those credit card balances low. Credit card balances are like salt, less is more.  The credit scoring model looks at your credit card balance in relation to your credit limit (this is called a credit utilization ratio). The lower the ratio, the more positively it affects your credit score. Make sure to never charge over 30% of your total credit limit, because you don’t want to get penalized.

Fourth, keep those old credit cards open and use them every now and then. You will get points for a long, lengthy credit history.

Fifth, don’t add too many ingredients all at once. If you don’t have any credit and are just starting out, don’t open too many credit cards too fast. One line of credit every year or so will work out great.

Sixth, remember to have more than one ingredient, if possible. The scoring model likes to see that a person can manage a mix of credit. Having installment loans (mortgage or car) and revolving loans (credit cards) will give a boost to your score.

Seventh, keep an eye on it. Check your credit report at least once a year and examine it carefully.  Make sure there aren’t any errors (such as creditors that you don’t recognize, late payments or collections reporting incorrectly, etc). This happens all the time, and the sooner you catch it, the better off you will be. Dispute any incorrect information to get it removed.

Attaining a great credit score takes a little time, self discipline, and attention. However, putting in the effort will assure that you can get the best deals on mortgage, auto, and credit card rates. Following the recipe we just laid out is a great start to help you cook up a great credit score!

~~Susan McCullah is the Product Development Director for Data Facts, a 23 year old Memphis-based company.  Data Facts provides mortgage product and banking solutions to lenders nationwide. Check our our website for a complete explanation of our services.

Credit Scores: Small Mistakes that Spell Big Trouble

Most people are aware of the big actions that can cause your credit score to take a tumble: filing bankruptcy, having an account sent to collections,or being foreclosed upon. However, these are not the only actions that can decrease your credit score. Here are some other mistakes a consumer can make with their credit. While not ‘major offenders’, these 5 missteps can still prohibit you from joining the credit elite.

Maxing out your credit card.

 The balance to limit ratio is almost as important as paying your bills on time, accounting for 30% of your credit score.  A good rule of thumb is to never charge over 30% of your credit limit. This means if you have a total of $10,000 as the limit on your credit cards, you should never have a balance greater than $3,000.

Consumers who think they are managing their finances wisely by only having one credit card, but are using over 30% of the limit are actually HURTING their credit score.

 Missing a payment

 Just one 30 day late payment can drop your credit score significantly. Payment history is the single most important factor in the calculation of your credit score, at 35%.

A consumer who has no late payments on their credit history is gaining lots of points for their positive usage! One late pay can change all that. It is possible for a good credit score to drop 80 points with just one 30 day late.

Whether you sign up for automatic payments through your bank, get an app that reminds you, or write the date your bills are due on your calendar, pay those bills on time!

 Not checking your credit report.

It is estimated that over a third of credit reports contain some sort of error. These bits of erroneous information can be accounts showing late that were actually not late, collections that should have never gone into collections, or accounts that are not even yours! 

By not checking your credit report, these errors linger on your credit history and can cause your score to take a dive. Be sure you are checking your credit report at least once a year.  Review all accounts, balances, and payment history.  Make certain to follow up on any information that looks erroneous, and get it removed from your report by filing a dispute.

 Co-signing a loan.

 Sure, you want to be a good friend, neighbor, cousin, brother, etc. and help obtain a line of credit your loved one cannot qualify for on their own.   However, becoming a co-signer on a loan for someone else is really asking for trouble.  If the borrower does not pay on time or at all, you are responsible for the loan.

The loan will also show up on your credit report and be factored into your credit score. If the borrower is paying late, all those late pays will show up on your credit report, affecting your credit score in a very negative fashion. And once that happens, there is nothing you can do about it.

The scariest part of all is that this can happen without your knowledge. Co-signers rarely receive a copy of the bill, so they would not be made aware of the issue until the account was in a default status.

The best advice on this one is: Just say NO!

 Closing an old credit card

 15% of a person’s credit score is their length of credit history.  Credit cards are factored in by the age of the oldest account, and the average age of all the accounts.

Look at this example. Say you have 4 credit cards. The oldest is one you opened in college, 22 years ago. The others you have had 15 years, 9 years, and one you just opened 2 years ago.  Currently, the oldest account is 22 years old, and the average age of the accounts is 12 years.  If you close the oldest account, that changes the oldest account to 15 years, and the average age of the accounts decreases to 8 years. This change in credit history can cause a decrease in your credit score.

The best idea would be to keep the old credit card, and use it a few times a year to make sure it is positively factored into your credit score.

 It’s obvious to guard against bankruptcy, foreclosures, and collections.  Also make it a top priority to put measures in place to make sure you don’t make any of these small credit mistakes either.  Your credit score will thank you for it!

~~Susan McCullah is the Product Development Director for Data Facts, a 23 year old Memphis-based company that provides mortgage product and banking solutions to lenders nationwide. Check our our website for a complete explanation of our services.

Increase Your Credit Score: High Tech and Low Tech Ways

Protect your credit score! Whether you are a high tech smartphone addict or barely use email, here are some everyday tips that you can put in place. These routine practices will boost your credit score to the top of the charts:
1: Make sure your credit report is accurate. If your credit score is being calculated from incorrect information, it may be suffering greatly. It’s estimated that 25% of credit reports contain some sort of error.
High tech way: You may request a copy of your credit report from http://www.annualcreditreport.com once every 12 months free of charge. This website is provided by the 3 main credit bureaus. Reviewing your credit report is a great way to catch any mistakes BEFORE they damage your credit.
Low tech way: You may request your credit report by phone or by mail. By phone:  call 1-877-322-8228 and you will go through a simple verification process. Your report will then be mailed to you within 2 -3 weeks. By mail:   download and complete the Request Form (available on the website) and mail it to

 Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348-5281
Your report will be delivered in 2-3 weeks
2: Pay your bills on time. Payment history is 35% of your credit score, so paying your bills on time needs to be a top priority.
High tech way: Techies have many options of apps that can be used to track spending and bill pay. http://www.mint.com and http://www.pageonce.com are 2 of the many apps that can set up all of your bills in one place. These apps remind you when bills are due, track spending, etc.
Another way to make sure you don’t miss any payments is to set up automatic payments from your online banking to your mortgage, auto, and credit card providers. This will ensure that you don’t rack up any late pays, which can tank your credit score.
Low tech way: If you are still walking to the mailbox to get your bills, put this practice in place; pay your bills the day they arrive. This may sound a little hard core, however, paying them when you receive them has its benefits. The bill won’t get a chance to lose itself in the pile on your desk, AND you don’t have to think about it anymore.
Another low tech option is to have a desk calendar that has all of your monthly bills marked on the date they need to be mailed (not the date they are due). Put the calendar in a place where you can see it every day, so the due date doesn’t sneak by you.
3: Keep your credit card balance low: Behind paying bills on time, account balances are the most important factor in your credit score (30%). Running up those credit card balances close to the limit has a dramatically negative impact on your credit score. Don’t let this happen to you!
High tech way; as mentioned in #1, there are many apps that can help you track you spending and budget. By following a budget, you can see where your money goes, and plan for bigger expenses (new furniture, vacations, etc) without charging up your plastic.
Low tech way: get a pencil and paper and make a budget. Track you spending to make sure that you know where your money is going. Open all of your credit card statements the day they arrive, and try your best to pay off your balances every month.
High tech and Low tech tip: While using credit cards responsibly DOES help raise your score, it’s a good all-round financial practice to make sure you are not racking up useless debt.
If you do end up using your credit cards and can’t pay the balance off every month, MAKE SURE you do not charge up more than 30% of your limit (ex: on a credit card with a $10,000 limit, never charge more than $3,000). Keeping your balances low will go a long way toward boosting your credit score.
4: Don’t close, lose, or ignore those old credit cards. Length of credit history is 15% of your credit score. The optimum credit history is 30 years long! Work hard to make sure those old credit cards are doing their job to raise your score.
Remember, credit cards must be used once every 6 months to be included in your credit score.
High tech way: set up one of your bills to automatically charge to your oldest credit card. It does not matter how small the amount. Any new balance will update that credit card at the credit bureaus so that all that great long credit history is showing up on your credit report.
Low tech way: carry your oldest credit card in your wallet and be sure to use it once a month to buy either gas or groceries. This purchase will keep your card active and counting positively in your credit report. Pay it off at the end of the month so you are not hit with any finance charges.
Putting some or all of these tips into place can go a long way toward maximizing your credit score and ensuring the best rates on your mortgage, car, and credit card loans. And, whether we are high tech or low tech, this should sound good to all of us.

~~Susan McCullah is the Product Development Director for Data Facts, a 22 year old Memphis-based company that provides mortgage product solutions to lenders nationwide.