Piggybacking On A Stranger's Good Credit To Raise Your FICO Score?

Yahoo! has an interesting story about the practice of “piggybacking” in which people with poor credit pay to be added as authorized users on someone’s credit card account, thereby picking up a boost from the “lender’s” payment history. Think it sounds silly? Some people are making good money doing it:

Brian Kinney, 44, a retired Army officer in Glendale, Calif., pulls in more than $2,500 a month by lending out 19 credit card spots on two old Citibank cards with strong payment histories. Kinney, whose FICO score is above 800 on the scale of 300 to 850,

$2,500 a month? What? It’s a good deal for the “renters” too. Just ask this guy:

Estruch paid $1,800 in December for three credit card spots, and by January, his FICO score jumped from 550 to 715. In mid-March, he closed on his four-bedroom beige stucco house after obtaining a 30-year fixed-rate mortgage from a unit of American Home Mortgage Investment Corp. It carried a 7.5 percent interest rate and required no down payment.

Guess what he does for a living? He’s a mortgage broker. Ha! Of course too much of this behavior could cause creditors to take action and change the effect that authorized user accounts have on FICO scores, essentially making them useless to those for whom they were designed. —MEGHANN MARCO

‘Piggybacking’ roils credit industry [Yahoo!] (Thanks, Kimberly and Jason!)
(Photo: the illustrious untitled 13)

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  1. xkaluv says:

    Why wouldn’t it also bring the guy’s good score down a little?

  2. chimmike says:

    problem is, FICO score isn’t the most important thing. There’s FAR TOO MUCH EMPHASIS ON FICO SCORE ALONE.

    Payment history is huge, delinquent accounts is huge, and TYPE of credit is huge.

    Credit card credit is pretty much laughable to mortgage companies and auto lenders. While it makes your FICO score high and pretty, it doesn’t get into things with high payments for set time periods much like auto loans and mortgages.

    So take the FICO score thing with a grain of salt. An 800 FICO score with just 1 credit card as history=not great credit.

  3. chimmike says:

    @xkaluv:

    because the card is under his name and not theirs. Their credit would be increase simply due to the good status of his card.

  4. Charles Duffy says:

    Damnit, this sucks.

    My wife and I have been trying to get her credit repaired — she made some bad decisions when she was young and foolish, but they’re going to be dropping off (yaaay 7 year limitation) by end-of-year.

    In any event — even without those dropping off, being an authorized user on the accounts open in my name was doing her a significant amount of good.

    I’m surprised that they can’t distinguish the cases where this kind of thing is going on. Couldn’t they just compare the mailing address where the cards &c. intended for the authorized user are sent to the individual’s actual address? If it’s going anywhere other than the location that individual is actually living (such as a 3rd-party credit-repair agency), you don’t count it for purposes of their credit.

  5. Steel_Pelican says:

    When I worked in the lending industry, I had to deal with many, many delinquent accounts that start similarly to this. Person A, with good credit history, agrees to cosign a loan for Person B, who couldn’t get a loan themselves. Person B then proceeds to max out the credit line, and leave Person A with the bill.

    This is VERY risky for Person A, whether dealing with loans or credit cards, as Person A has little recourse if Person B doesn’t hold up their end of the bargain.

    I don’t know if I’d let someone possibly destroy my credit rating for a few grand.

  6. dohtem says:

    Capitalism at it’s best!

  7. enm4r says:

    I like the idea. It’s the same reason I have friends still tied to their parents credit cards, oddly enough having “credit histories” that are older than they are.

    Good practices will make up for this in time, however. As a 23 year old my oldest credit card is just shy of 5 years now, and due to my range of car loans, educational loans, and credit card history my FICO score is 750. My couple friends who are in almost identical situations, with the addition of their parents lengthy credit histories, only raises them by about 20 points.

    I have no problem with this, and I wouldn’t even have a problem doing it myself. It’s like being paid to cheat off your test in school, I have no problem with it as both sides win.

  8. myrall says:

    Whaaaaa? I had a card that my mom took care of for me all through college (emergencies only) and it never showed on mine OR her credit reports. I was the only authorized user on that account, too. Also, what about all those company cards I was issued in my name? Those never registered either. Is this bogus?

  9. winnabago says:

    You don’t actually send the renters a card, duh. That’s an invitation for these deadbeats to steal from you. You get a new card for them and promptly tear it up, whatever you buy and pay gets credited to them too. The CC company doesn’t even know their address, making it just like intentional identity theft.

    In the end, they get a better credit score without doing anything. Using FICO as a caste system in this country is what’s stupid, and anything that further makes a mockery of it is fine by me.

  10. Charles Duffy says:

    @Steel_Pelican: Read the article. Short story is that a 3rd-party agency received the card on behalf of the individual being added to the account, and the individual being added never received enough information to actually make use of that account.

    That’s the theory, at least. That said, I wouldn’t trust that someone couldn’t get enough information to social-engineer themselves into such use by pulling their own credit report and then calling up the company offering the card…

  11. SOhp101 says:

    @myrall: When your mom put you on as an authorized user, she probably didn’t give them your SSN. You can call the cc company to get them to put it on (chances are you’ll have to fax in verification) and/or you’ll have to put in a dispute with the credit agencies.

  12. orchid777 says:

    I’m glad to hear this actually works. I’ve had my younger brother as an authorized user on a card for a couple years. More power to the “lenders”.

  13. Melov says:

    Authorized users are NOT reported to the credit bureaus and are NOT responsible for payments on an account. It doesn’t matter where you have the credit card through. And since he said he adds these people to his Citi cards, I can promise you that authorized buyers are not reported. I work for Citi. The only way this would affect your credit is by being added as a Join Account Holder. Either your story teller is lying or you have the wrong verbiage down.

  14. Melov says:

    @Melov:

    The reason they aren’t reported is because they are not responsible for making payments on the account and keeping it current.

  15. Brie says:

    Okay, following the logic so far: Apparently I’ve been an authorized user on two of my dad’s credit cards since 1990(!). Since I was “only” an authorized user, nothing he does can do anything to my credit, right?

  16. Melov says:

    That is @MissedTheExit:

    That is correct. If your father were to get very far behind on the payments, or dies, the credit card company might ask you if you’d like to take over on making the payments. From there it would go onto your credit, thought I’m not 100% sure on this. I don’t know who on earth would do that, but apparently it’s enough for CC companies to keep asking.

  17. rbb says:

    Whatever you call it, it is still fraud.

  18. Melov says:

    I also forgot to mention that CC companies only allow 1 joint account holder at a time. So if this so called internet based company does exsist, they would need a lot of CC users with good paying history to work with them, and I just don’t see that happening.

  19. cindel says:

    Nope Nope and NOPE!!

    Starting this fall, FICO will not factor AU into scorings. Lenders and Credit companies will no longer consider AU when giving out loans and credit.

    So if anyone here is a AU using on someone else’s dime, consider yourself warned.

  20. cindel says:

    Just wanted to add: JOINT Accounts are different and legal.

  21. kerry says:

    I have three credit cards on my credit report that belong to my mother. At one point or another I was an authorized user on these cards. Two of them were closed in good standing, one of them remains. They’ve helped give me a 20+ year credit history (I’m 28) and a high FICO score. It may not work for all credit cards, but the Visa and Discover cards my mom had me on still sit on my credit report, making me look good. It helps that I have two credit cards of my own with low limits and no balance.

  22. Zuhaib says:

    Actually i am guilty for doing this.
    My best friend was having a hard time getting a AMEX card, and had very little established credited. I had one of AMEX higher cards and had an allotment of people I could add so i added him to help him build his credit. And it worked out actually for over 3 years, he always paid me on time and now he has open his own.
    Also i father wanted to make sure we had good credit so when I turned 18 he added me to a lot of his credit cards but kept them from me (smart idea) and kept small payments. Now I have all credit cards opened on my name and have a better score then he does (I actually had to secure some of the business card because they would not give it to him). So this is not a new idea, i am guessing just now it is starting be become popular as creditors start locking down on loans and such with bad credit.

  23. Brie says:

    @Melov: Thank you. :)

  24. Lula Mae Broadway says:

    Pretty brilliant idea if you ask me. I had no idea what a credit score was or why I’d ever need a good one when I was young & dumb. While I’ve cleaned up my act, and my score is in the high 600s, I have no idea how to get it up into the 700s and would absolutely consider piggybacking.

    Considering the myriad ways greedy credit card companies screw consumers, I say all’s fair in love, war… and money.

    Now does anyone know a respectable company where I can do this for less than two grand?

  25. troublz says:

    Mostly because of the abuse of this “loophole”, it will soon be closed, starting in September of this year. I just read this info this morning:

    http://www.mymoneyblog.com/archives/2007/06/future-fico-sc

    It’s worth the read if a) your credit score is already higher because you’re an “authorized user” on a card b) you’re considering doing this to up your score c) you’re considering doing this to make some money.

    ~troublz~

  26. cgmaetc says:

    I’m glad to hear people are finding kinks in the unfair and silly FICO system. The very fact that someone who’s 28 can have a 20 year credit history from being an AU, and therefore a higher score, just proves how messed up the FICO scoring system is.

    Power to the people!

  27. Her Grace says:

    @kerry: Yep, me too. I have a single credit card of my own (no balance, paid in full when I do use it), a debit card for each of my two bank accounts (Aussie and US; each equipped to run as credit if needed), and a handful of my mom’s credit cards. I’m an AU and have been since I was about 15. It’s probably helped by establishing my credit, but I don’t think it’s helped drastically. My credit score is good for what I am: 22, post-grad student only taking student loans for the post-grad, all debts (credit card related) paid on time and in full, not having had a car or house in my name. I think the FICO score is a bit silly.

  28. lilyHaze says:

    I didn’t have a credit history until I went off to college [my first being my college loan]. I got my first CC (with a high APR, low limit) at age 20. I never carried a balance and always paid it off.

    Five years later, I was able to get an auto loan (on my own) with the best possible interest rate (scores in the 700s).

    My brother asked me to open up a store CC because he had no credit. We set him up as a joint account holder. (So he could improve his non-credit history score.) I wouldn’t have done this with anyone I didn’t trust.

  29. lawnmowerdeth says:

    I’m kind of interested in this as a credit line provider. I’m kind of worried about possible fraud obviously, anyone have any experience with the company before?
    Website testimonials are worthless, they’re no better than ‘make money’ infomercials!

  30. GOOD. The credit reporting agencies and their customers are using every dirty trick they can against consumers; I’m all in favor of consumers finding loopholes to fight back with.

  31. JenniferInMo says:

    I have mixed feelings about the policy. I am not too keen about the practice of paying to abuse a loophole to increase a credit rating, yet there are legitimate reasons why an AU should be reported. I think AU’s should just be identified as such and perhaps it should carry less weight in the algorithm.

    I am 43, have had great credit all my life until I had a failed business followed by serious medical problems (I had no insurance) and I finally had to file bankruptcy. That was three years ago and since then I have a perfect payment history, but I have been paying obcene interest rates and fees for a car loan and small credit cards to get my credit back. I have a small JC Penney card and put my husband on it as an AU. That shows on his credit record.

    Here is the question: I have been an AU with my own card on my Mom’s Mastercard for 10 years (she has had the account for over 20). She doesn’t use the card, but I used it for about 2 years and paid the balance every month. It does not appear on my credit record, but I think it should (even though I was not technically liable). Does anyone know how to get them to report it on my credit report? Do I write to the credit card company or the credit bureaus to request it?

  32. JenniferInMo says:

    xkaluv said: “Why wouldn’t it also bring the guy’s good score down a little?”

    This practice shouldn’t affect the good credit guy because there is no connection of the two people reported. On a joint account there will be a notation (“Joint Account with _____”). The way I understand it there is no reference to the AU on the good credit report at all. This turned out to be the case when I ordered a second card on my JC Penney account for my husband. It just shows up on his account as though it was his account. It makes no mention of him on my account.