Piggybacking on the Good Credit of Others
I’ve heard about this for a while but now it’s taken an interesting twist.
Piggybacking on good credit is when a person with good credit adds an authorized user to their credit card, not to extend them the ability to use that credit card but to allow that authorized user to gain from the good credit of the account holder.
The twist is that if you are looking to boost your credit, you can pay a service to hook you up with a good-credit individual, a stranger, who will add you as an authorized user. The service gets a hefty fee, the person with the good credit gets a small portion and everyone is happy. Well, except the credit industry who seems divided on whether this is legal. More on that viewpoint at Bankrate. Don’t look at me to sympathize with the credit card industry. (Boo hoo!)
The authorized user never gets a credit card in his or her name so they (supposedly) cannot really use this credit. They simply benefit from the addition of the good account history to their credit reports.
So what’s the risk here? If the person riding the good credit pulls their credit reports, they may get a great deal of information about the account. I looked at my last credit report pulled directly from TransUnion, which was in September 2006. It listed complete account numbers. Experian and Equifax did not list complete account numbers. Most credit reports list who an account is joint with so they could easily get the name of the person who extended their good credit to them, also.
Piggybacking is usually done among family members, typically parents adding children to their accounts. I was actually planning to do this with my step-daughter when she turns 18. About the only thing listed as a factor in my credit score not being as high as it could be is that I don’t have a 15+ year history, which technically I would not be able to have because that would mean I was getting credit at age 16. If I took my oldest account, which was opened in 1995 and add her as an authorized user in 3 years, she will suddenly have an account with a very high limit and very long history on her credit reports. She will never have to worry about account length history being a problem for her and I bet her credit score will be darned good.
The difference is that I feel a degree of responsibility for her credit worthiness. If she got herself in a moderate degree of credit trouble on her own, I would probably help bail her out, depending on the circumstances and lessons learned, of course.
Is it fraudulent to piggyback? Perhaps. You won’t see me signing up to piggyback for strangers. That’s for sure. For my step-daughter, though, I’m willing to do it and accept the risks and responsibilities that go along with adding her as an authorized user. I don’t think that’s fraudulent at all.
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May 1st, 2007 at 10:41 am
It’s pretty common amongst family. I have Carl as an authorized user on a couple of my cards for practical purposes (it’s easier if he’s running an errand for me), but the credit score increase is a nice side effect.