Saturday, April 07, 2007

This is a GREAT Idea

The Baltimore Sun reports that there's a new way for people with bad credit histories to borrow money - for mortgages, or other purposes. They can 'rent' the good credit history of other credit holders, incorporating them as sponsors on their own applications. I'm a strong believer in the power of the market to empower individuals - but this neat market innovation sounds like one we could do without:

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.

But 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 sub-par histories - ostensibly without breaking any law...

The person seeking a higher credit score does not obtain actual access to the credit card. But within 30 to 90 days of being added to the account, the national credit bureaus incorporate the primary cardholder's account information into the files of the authorized user. The score-raising attributes of the primary cardholder's stellar payment record then flow through to the new user.

One company based in Tampa, Fla., recently solicited mortgage brokers promising FICO score boosts of 150 to 205 points for applicants "in as little as 30 days" for the "discounted" price of $750 per trade line.

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