I had a fascinating call with a mortgage broker from Alabama yesterday afternoon. He had seen our blog posts and articles about the recent FICO decision to no longer count authorized user accounts and wanted to learn more. 

By the end of our 20 minute call, the mortgage broker was feeling pretty bleak about the impact this change would have on his industry. "The mortgage industry is going to crumble. Just fall apart," was his exact quote.

Authorized user accounts have been a favorite trick of mortgage brokers for some time. If a potential client doesn&39;t have a high enough credit score, they&39;ll often advise the client to have some one with good credit add them to an established account as an authorized user. Once the new account appears on their credit report (usually within a few weeks), their credit score can increase. In the event of someone with no score or a very low score, the increase could be significant. Voila! Instant credit improvement and a better loan candidate.

A case could be made for this use of authorized user accounts being fraudulent. Sure, it&39;s not as bad as the credit repair companies that sell piggybacking services for thousands of dollars, but it is still a misrepresentation of the client&39;s real credit data. I&39;m sure there are some borrowers who got artificially low rates or loan deals based on this "instant" credit fix.

Fair Isaac has stated that this credit scoring algorithm change was designed to protect lenders from fraud. And by stopping brokers from recommending authorized user accounts, I suppose they are. But to an already ailing subprime mortgage industry, this change may just be another nail in the coffin.

What do you think will be the impact of the FICO score change on the mortgage industry? Did you use an authorized user account to boost your credit before a mortgage application? Share your feedback in the comments section below.