Don't Buy Credit
While some people with low credit score buy credit to quickly improve their credit worthiness before applying for loans, others establish their good credit score the long, conservative and traditional way. To establish good credit, most people start with one credit card and low credit limit, use it once in a while and at make at least the minimum payments on time. With this conservative approach, they expand their credit worthiness over time while others prefer the quick and easy way to establish their good credit. For a fast boost in credit, some may ask their relatives or friends to include their names on their existing accounts or buy credit from people with good to excellent credit history and credit score through credit boosters or credit brokers.
There are many brokers who help consumers improve their credit score by bringing together people with good credit and those willing to pay to boost their credit score. Once they are matched, the credit seller places the buyer’s name on the seller's credit card as an authorized user. This practice is nothing new and for a long time, family members and close friends have done so to jump start the credit scores of their loved ones. Parents have also been doing this for the longest time since the credit scoring process was developed to jump start their kids’ credit.
The cost to buy credit and improve one’s credit score depends largely on the number of credit card accounts the buyer wants to be placed on and credit score points they want to improve. For example, to obtain a mortgage at a certain interest rate, the banks may require a credit score within a certain range. Depending on which range the applicant's credit score resides, the bank decides whether to approve a mortgage application and determines the interest rate based on credit risk. Therefore, once a borrower determines his or her credit score and bank’s credit score requirements for the desired mortgage program, the borrower may plan to approach a credit broker and negotiate the cost to buy credit for the additional shortfall in the credit score. The smartest borrowers do their credit score analysis and plan their credit improvement strategy before applying for the mortgage and being rejected for new or increased credit.
The entire concept of buying credit is a very dangerous for every one in the credit establishment process and the credit scoring systems are changing to address this loophole. First, lenders are the biggest losers because they make credit decision based on inaccurate data, which ultimately leads to higher payment defaults and loss of financial investment. This type of credit piggybacking has resulted in greater default risks to borrowers who have falsely built a perception of great credit worthiness and obtained excessive credit by buying someone else’s good credit.
Although some lenders use their own scoring systems to obtain a more reliable credit data, most lenders still use the Fair Isaac Corporation’s FICO score which is always making changes to its credit scoring system to resolve similar issue.
The sellers of good credit scores also place themselves at risk by sharing their good name and account standing with strangers. It is amazing to see that people who have worked so hard and for so long to establish their good credit history and credit score would risk it all for extra cash. Once a person is listed as an authorized user of an account, there is no limit to what damage that person can inflict on the established account.
And lastly, the buyers are forced to share their personal information such as a social security number with the sellers to place their names on their account. Once personal information is shared with others, there is an increased risk of abuse of the information to commit identity theft and identity fraud.
In conclusion, a true credit score is a measure of a person’s ability to pay the debt back and when it’s manipulated in such manner, every one loses except maybe the credit score broker.
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