Go FICO Yourself: Selling Your Credit Score



Here’s the latest scam to hit the Real Estate/Mortgages/Credit/FICO market:  Buying and Selling FICO scores to qualify sub-prime applicants for tightened standards.

Kenneth Harney explains how this loophole is now being used:

"When your credit scores don’t qualify you for the home mortgage you
want, where do you turn? That’s an especially timely question now, as
banks and mortgage companies tighten underwriting standards for
applicants with less than perfect credit.

federal and state authorities fear that some borrowers are turning to a
fast-growing business on the Internet: companies that claim to boost
credit scores by transplanting the credit DNA of people with excellent
payment histories into the credit files of people with subpar histories
— ostensibly without breaking any law.

The companies claim to
raise FICO credit scores by 50 to 250 points by adding low-scoring
borrowers as "authorized users" on the credit card accounts of people
with FICO scores well in excess of 700. The positive payment
information from such cardholders then flows into the files of the
persons with subpar credit."

This takes advantage of a loophole in the Federal credit law, which does not limit the number "authorized users permitted on any single credit card account."

As this article makes clear, the law does not "prohibit the rental or sale of authorized user designations. Exploiting
that loophole, numerous companies have popped up on the Internet
offering to buy and rent out the credit card "trade lines" or accounts
of credit card holders with high limits combined with perfect payment

The online firm referenced up top markets itself to mortgage brokers, as a way to rehabilitate sub-prime borrowers, making them appear better than sub-prime to lenders.

The potential for fraud is there — especially with the way loan originators offload mortgages. As long as everyone involved keeps the loan going for a few months  (3-6 months) prior to default/foreclosure, the loans can get easily sold and not represented to the originator.

Consider how easy it is if a few players are in on the fraud:  If the appraisers over-value their estimates of the home, it allows excess purchase prices to be paid. The RE agent gets their commissions, the mortgage broekrs get paid, the originator who did the loan got their fee. The buyer who magically qualified for much more house than they could afford gets a seller’s concession in cash/check. The Washington Post reported this weekend:

"The basic scenario involves real estate agents who
have listed houses that aren’t selling. To move the properties, they
entice buyers or friends to "submit an offer [for the home] that is
$30,000 to $100,000 above the current list price" with the promise that
they will get substantial cash at closing.

The real estate agents
then amend the multiple-listing-service asking price to match the
artificially inflated offer price. A house that had been sitting for
months with no takers at $450,000, for example, might be relisted by
the agent at $525,000.

Then, working with a cooperative appraiser
who has promised to hit the number and an unscrupulous mortgage broker
who simply wants the commission, they "change the [loan] documentation
to reflect the [artificially inflated] sales price." The loans
typically are for 100 percent of the price of the house. The seller
nets the price he or she had originally listed — $450,000 in this
example — and the buyer gets some or all of the $75,000 inflated
differential as cash at closing."

I have no idea how prevalent this might be, but on the margins, its potentially pretty ugly . . .


Psst: Want to buy a better credit history?
Kenneth Harney
Washington Post Writers Group,  April 20, 2007 – 12:08 PM

Appraisal Inflation
Kenneth R. Harney
Washington Post, Saturday, April 21, 2007; Page F01

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What's been said:

Discussions found on the web:
  1. Estragon commented on Apr 25

    Isn’t this sort of like cosigning a loan for someone you don’t know. Why not just send all your money to the nice fellow in Nigeria who just needs your bank info to release his captive millions?

  2. dukes commented on Apr 25

    I don’t even know what to say about this article. When you think that some sanity HAS to enter back into the system, the “financial creativity” of some just takes piling on risk to new heights. This can only end badly.

  3. shawn commented on Apr 25

    So, which country is worse? USA, or UK?

    UK allows 50-year mortgage + 125% LTV + Borrower of Un-limited age (You can qualify for 25 year mortgage of $200,000 Pound if you are 102) . LOL!

  4. Michael C. commented on Apr 25

    Wow, I don’t know whether I am more intrigued by the ingenuity of it or the sheer sleaziness of it all.

    I’ve heard of this method for adding your kids as authorized users in order for them to obtain credit more easily and quicker, but this is definitely borderline fraudulent.

    While there may be no law against this, the intent of authorized users by cc companies is for them to utilize your credit line, not your credit history!

    If a fraud is committed down the line because of these “trade lines”, some one will go down for it. And of course, those that use this previlege legitimately will be hurt in the process.

    Thanks for the article, BR.

  5. Michael C. commented on Apr 25

    Two more thoughts:

    1) With the abundance of identity theft, one is taking a huge risk in lending out your credit card info, etc. Moreover, you are probably less protected now by your credit card or whatever laws there are because you willingly lent out your information.

    2) If someone is even remotely interested in doing this for earning the small fees, you are better off doing what some call an “apporama.” In other words, apply for as many 0% BT cards in one day, then use that BT money to earn interest. You take a hit on your FICO from the inquiries and new accounts and high balance but it will be wiped clean after a year and all the BT is paid off, but you have the interest earned to keep and now a higher credit line.

  6. RW commented on Apr 25

    Perhaps I’m just growing old but when I visited http://apporama.com/index.html and read the ‘executive summary’ and some of the posts I felt a distinct chill.

  7. Craig commented on Apr 25

    Kiss that 700 plus FICO score goodbye.
    Nothing like turning a AAA borrower into default/bankrupt in about two seconds.

  8. Winston Munn commented on Apr 25

    All those out of work AEs from the subprime industry need jobs and this sounds right up their alley.

  9. James Bednar commented on Apr 25

    Isn’t this sort of like cosigning a loan for someone you don’t know. Why not just send all your money to the nice fellow in Nigeria who just needs your bank info to release his captive millions?

    I don’t believe authorized users are given access to the card or account. They can’t make changes, request cards, or make any charges.

    I can’t imaging the credit scoring agencies will let this game go on very long.

    Why not change the rating algorithm so that in order to gain the benefit of the original account holders payment history the new user would need to be added as a joint cardholder. Adding a new joint cardholder is another matter entirely.


  10. Steve commented on Apr 25

    Wow, I don’t know whether I am more intrigued by the ingenuity of it or the sheer sleaziness of it all.

    I know what you mean. Should I be appalled or impressed?

  11. Peter commented on Apr 25

    To add to your last blog on the ripple effects of housing. Over the past week, Southwest Air, JetBlue, Continental and UAL all said domestic bookings were weak.

  12. anon commented on Apr 25

    re: appraisal inflation, i have seen this (or what has to be this – no proof) but not too widespread. my question is, what does the buyer then do? turn around and (try to) sell at market value?

  13. dark1p commented on Apr 25

    Funniest quote of the day, hands down:

    “Bank of Spain governor Miguel Angel Fernandez Ordonez attempted to reassure financial markets yesterday that the country’s housing market was in only a gradual slowdown. This came after real estate stocks tumbled on fears that a decade-long property boom was unravelling.”

    “‘We think the property market, construction in general, is going to have a soft landing, which is what it’s having,’ Ordonez said after speaking in congress. ‘You know what the stock market is like: it’s calm one day, goes up the next. It doesn’t do things based on reality.’”

  14. James Bednar commented on Apr 25

    If you think this is sleezy, you should dig up some dirt on the firms that will loan a borrower money simply for the purpose of inflating that borrowers assets and bank statements.


  15. Billy commented on Apr 25

    Back in the 70’s I worked at a Dodge dealership. They would send people to the mouse house for financing. The dealer would get them a loan for the downpayment on the car (because the buyer didn’t have any money), and since the new loan wouldn’t show up on their credit they would then qualify for the loan they needed to buy the car. Nonetheless the dealer no longer exists.

  16. Bob from Brooklyn commented on Apr 25


    In your beyond-brilliant blog, didn’t you recently have a post that markets are (mostly) efficient ?

    Of course they are…they work perfectly for the insiders who undermine them.

  17. super-anon commented on Apr 25

    Should I be appalled or impressed?


  18. V L commented on Apr 25

    It is chilling.

    On every level, there is fraud (borrowers, realtors, appraisers, mortgage brokers, originators, credit agencies, wall-street-repackages, etc). All of them have benefitted and/or made a lot of money. Now, they are pulling another swindle by pretending to be the victims and wanting the taxpayers to pick up the tab and bail them out.

  19. DavidB commented on Apr 26

    BWA! HA! HA!!

    Couldn’t happen to a more deserving industry

  20. Creditwrench commented on Jun 2

    One of the big players in this cottage scam industry is Adam Wheeler of Lake Forrest California. Riding on his coattails is a credit named Brandon L. Callier of El Paso Texas who runs an equally creepy outfit he calls CCH CONSULTING and he charges $1600 for the “service” he sells to Wheeler for $1025 or less. Callier uses a host of false screen names such as E. Normis Debtor, Uncle Normie and more and posts on insidearm.com posing as a friend to debt collectors. He badmouths everybody he thinks is competeting with him in any way whatever. They don’t have to be selling phony credit repair tactics. He will blast them any way he can including cybersquatting their trade names.

    He is to be avoided at all costs. He cannot be believed in anyhing he says.

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