New credit regulation go into effect this week that could impact 16 million people.
For many years, people were allowed to share their credit cards with authorized users. Husbands historically did this for their stay-at-home spouses who were working in the house with little income to show for it.
Unfortunately, criminals figured out how to take the whole authorized user thing one step further — they actually generate inflated credit scores for risky candidates by renting out someone’s good credit.
Think about it in the following way. Let’s say I have terrible credit and you have great credit. A third party operator used to be able to charge me $1,000 to rent your credit status. You might have received $500, the operator would keep the other $500 and I used to be able to get a bogus good credit score in your name. The problem is that the renters — me in this example — were defaulting at huge rates. So then the credit bureaus just eliminated all authorized user credit standing across the board.
Now we’re going to a system that will allow someone under the same roof to be able to rely on a partner or spouse’s income to qualify for credit in his or her own name as long as they’re at the same street address. This should help approximately 16 million people get credit.