A new credit card scheme (I refrain from calling it a scam because it’s not illegal yet), allows people with low credit scores to get instantly higher scores by purchasing a higher score from someone with a good credit score. The scheme takes advantage of a loophole in the way that reporting agencies calculate credit scores. Every time a credit card account holder adds an “authorized user” to their account, part of the account holder’s credit score is transferred to the “authorized user.” For people with low credit scores, being added as an “authorized user” to an account with a good credit score can end up saving thousands of dollars on home mortgages, loans, and almost anything that requires good credit.

However, if you have low credit, finding someone with good credit to add you as an authorized user on their credit card could be difficult…until now. Like internet dating services, new internet startups are responding by helping link people with low scores to people with high scores — for a price — usually about $1,000. One of the more established companies offering this so-called service is instantcreditbuilders.com, or ICB. According to ICB it’s a win-win scenario. People with low credit ratings can have their score boosted almost instantly, saving thousands of dollars. For people with high credit ratings, they can make around $2,500/mo with a good score and feel good about helping someone in need. In the testimonials section, ICB profiles Brian who claims:

ICB allowed me to quit my job and start a business. Let me explain how. I got out of the Army and came to live in California. I worked in an insurance agency for several years hoping to gain enough experience to launch my own agency. Around the time that I felt ready to launch, I read about ICB in the Wall Street Journal. I called and told them I had some crusty old credit cards and an 812 FICO. To make a long story short, I went from a dead-end job earning $2,000 per month to being self-employed with a $2,350 income stream. The day after I received my first check from ICB, I turned in my 30 days notice and prepared to launch my own insurance agency. I’m starting slow with group health plans, workers comp, and small business policies. Without the ICB income I would be hustling 18 hours per day just to survive. Instead, I’m spending time with my kids and growing my business at a steady pace. If you live in California, you know that $2,350 isn’t enough to survive on. My rent alone is $2,500 per month. I also have income from rental real estate, a 20-year military pension, combat disability pay, and my wife’s part time job. I should also mention that ICB is allowing me to “Pay It Forward” by helping some senior citizens use their seasoned credit lines to supplement their incomes.

According to ICB, users of the service don’t receive copies of your credit history, account numbers or social security numbers. On ICB’s FAQ, they claim that the service is 100% legal and has been used by industry professionals for years:

Yes, it is completely legal. This, technique has been used for years by mortgage brokers, bankruptcy lawyers and real estate agents to help their clients establish trade line accounts with history, to boost their credit score. Please Read – The 1974 Equal Credit Opportunity Act, for the legal statutes and codes.

Legal? Yes, but it has lenders worried, and they’re already taking action to close the loophole. From their perspective, the practice tricks them into lending money to people who are more likely to default on the loan. As this practice becomes more widespread, expect credit scoring agencies to revise the way they score a user’s credit history, effectively closing this loophole. So if you’ve got good credit and are looking to make some easy money, act fast, but here are a few risks to consider before you do:

1. You’ll be sharing your social security numbers, credit card account numbers, personal information and everything needed to steal your identity to a company who will be effectively selling your identity for personal gain.
2. If things go awry, it might be difficult to prove your identity was “stolen” by a company that was paying you to sell it to people with low credit scores.
3. There are no Federal guidelines to regulate how these companies operate. As more and more of these credit brokers pop up, it will be difficult to determine which ones intend to steal the identities of their users and those who will actually follow through and deliver a “service.”
4. Although companies like ICB portray the situation as win-win, everyone loses when people take personal lines of credit which they can’t pay back — especially those who end up declaring bankruptcy.
5. This money making opportunity will likely end soon. But once you’ve “sold” your identity, the company you’ve sold it to will have it forever. Think Dr. Faustus.

At the end of the day, if you decide to sell yourself, let me know how it goes, but don’t say “I told you to do it” and I won’t say “I told you so.”

Consumers allege that the bureaus — Equifax, TransUnion and Experian — are engaging in a practice that artificially lowers their credit scores, and that they are ignoring pleas to remove inaccurate information from the reports.

While knowing your credit rating is important, but it seems that the credit bureaus are allegedly more interested in selling you your credit score rather than making sure it stays accurate. Law.com reports that the number of this type of lawsuit is on the rise:
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