Fair Isaac Has Initiated a New Policy to Help Stop Identity Theft

Beginning in September, Fair Isaac, the company that compiles the FICO credit score, will no longer allow authorized users to benefit from someone else's credit history. Until now, many credit card holders have added a spouse or child as an authorized user of their credit card to help them build a credit score of their own.

Fair Isaac initiated this new policy to help stop identity theft resulting from unauthorized use by persons with poor credit of credit cards held by cardholders with stellar credit. This type of identity theft is called piggybacking.

In the past many adults added a child or spouse as an authorized user because the child was a minor or the spouse could not get credit otherwise, or only at a higher rate. The authorized user might have filed for bankruptcy or had their wages garnished. It is best to be cautious about adding another person to your account. Mixing your credit history with that of a spouse who has a low credit score can reduce your ability to get additional credit. If you decide to buy a car or home, you might have to pay a higher interest rate for the loan. Most important, if your spouse has a problem living within his income, a new credit card will not help him learn to live with in his means.

Once your child turns 18 and heads off to college, credit card companies will begin offering all types of free items to get him or her to sign up for a credit card. If you have seen the new film, “Maxed Out,” or read the book, you know the consequences of credit for college students. Most young people know little about credit cards and are likely to overuse them.

Parents must help kids develop money management skills while they are still in high school. You might want to check with your high school principal to see if any of your teenager’s classes are using the High School Financial Planning Program. Also check with your county 4-H Extension Service, which has this award-winning program material available. And, while you’re at it, see what other excellent financial education programs they offer for younger kids. If you teach your children about money consistently and from a young age, they will be much more likely to use it wisely and not get into excessive debt.

Reference: CRM News: Finance- Fair Isaac Moves to Curb Credit Score Manipulation 06-06 -07. http://www.crmbuyer.com/story/57702.html

Source: Robert H. Flashman, Ph.D., State Extension Specialist in Family Resource Management, University of Kentucky Cooperative Extension Service