Credit Card Piggybacking Still Raises FICO Scores

You can still raise your credit score by getting added as an “authorized user” on the credit card account of someone with better credit. Industry plans close the loophole starting this September are still yet to be implemented. The change was to be part of the update to “FICO ’08,” a revised version of the credit scoring system sold by the Fair Issac Corporation and in use at the three major credit bureaus, Experian, Equifax, and TransUnion. So-called credit piggybacking is used by parents to help their kids get on the fast-track to better credit ratings. It has also used by fraudsters to qualify for mortgages they wouldn’t otherwise get – a contributing factor to the delinquencies in the subprime meltdown.

Reprieve for the ‘Piggybackers': Still No Credit-Score Crackdown [Washington Post]
PREVIOUSLY: FICO Removing “Authorized Users” From Calculations; Credit Piggybackers Scores Dropping
(Photo: Schnittke)

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  1. ShortBus says:

    Just do a google search for “tradelines”. It’s pretty crazy… It’ll cost you about $1000 per good account. But supposedly, it’ll boost your FICO 50-200 points, depending on the quantity and quality of accounts added. If it really could boost you from 550 to 750 though, you’d save about $1000/mo. in interest for a 30 yr. mortgage on a $300k home.

    Does anyone know what would happen if you got approved for a low interest mortgage using this technique and then your FICO plummets once this loophole is closed?

  2. darnellswife says:

    Fair Isaac is by no means fair. The scoring system is so flawed that I don’t even understand why businesses are allowed to use them. You can have a low score just because you decide you don’t want any credit cards and only pay for crap you can afford, well guess what? When it’s time to buy that shiny new house and you don’t get approved because your fico is 560 when it could have been 700+ if you’d just agreed to acquired cc debts and stop paying cash for everything. F*ck Fico.

  3. darnellswife says:

    @ShortBus:

    Ratejack time and a no go on any future Refi.

  4. Sam2k says:

    @darnellswife: If you choose not to use the system, you can hardly complain when it doesn’t help you when you need it. Thats like saying that a game of basketball isn’t fair because you only choose to play soccer. Then, when you try to play a game of basketball you lose miserably. Either use the system or don’t.

  5. Sam2k says:

    Btw, the entire point of the credit score system is to show that you have been extended credit in the past and you have either done well with it or have not. If you have not been extended credit, then you have no right to a score that says you have. Also, it is very possible to use credit cards without going into debt. Its all about fiscal responsibility, which is actually what a credit score is about.

  6. DallasDMD says:

    @Sam2k: Your analogy is flawed. Getting a mortgage and only using cash/debit cards on daily purchases are two different things. For your analogy to be fitting, he would have to complain about not being able to get a credit card after shunning them for a long time.

    A fair way of scoring would take into account that you have avoided becoming in debt and have a reasonable salary to pay your mortgage payment every month. But noo, we have to stick to an arcane system like FICO that forces you to play a stupid game with credit cards.

  7. DallasDMD says:

    @Sam2k: It definitely is, however, one can show just as much responsibility by not participating in the credit game to begin with. If you deny yourself lines of credit, that is obviously good discipline right there.

    There is no reason why FICO could not take this into account and work well for lenders.

  8. dirk1965 says:

    Become debt free, pay cash for everything… screw credit scores!

  9. pinkbunnyslippers says:

    @darnellswife: All you have to do is keep credit accounts open and pay your debt off in full each month, and you’ll have a fabulous credit score.

  10. mac-phisto says:

    @darnellswife: if you don’t have any credit, you should have no score whatsoever, not a 560. every time i’ve seen a blank report, there’s a UNS or *** or N/A (meaning unscored) next to where the score should be. it makes perfect sense that someone who has ZERO credit history would have ZERO score. just b/c someone has no debt & pays everything in cash doesn’t mean they are responsible borrowers.

    you could think about it like this: before credit cards & scoring & megabanks, credit lines were provided by grocers, barkeeps, general stores & local banks based on a customer’s history with their institution. people that were known by the owner/manager & paid their accounts on time were given access to more credit.

    the scoring system is just an aggregated statistical approach to that same idea. “strangers” don’t get access b/c no one w/in the system knows them or their ability to pay on their accounts.

  11. nightsweat says:

    Does it matter who is the primary on an account? If my wife’s score is higher than mine does it help more to make her a second on my accounts or to make me a second user on her accounts or is it irrelevant as long as we’re both on the account?

  12. Tux the Penguin says:

    @darnellswife: As someone who has very little credit history, I won’t be able to get a home loan using FICO (I bet mine is around 600 only due to a student loan I’m almost done paying off). However, you can still get loans the traditional way, by proving your income and doing manual underwriting. That’s what FICO attempts to estimate for the company. Its possible, but your choice of lenders narrows because of it. However, you’re less likely to borrow more than you can afford because of it.

  13. ratnerstar says:

    The FICO rating system is often unfair, yes. But the reason businesses use it is because, fair or no, it provides a decent approximation of your credit worthiness. There are deadbeats with high scores and responsible people with low ones, but on average FICO is reasonably accurate.

    I do feel for people who don’t want credit in everyday scenarios but need it to buy a house. My advice would be: start gaming the system now.

  14. JustAGuy2 says:

    @pinkbunnyslippers:

    Yup, and you get the extra bonus prize of a small, but non-zero, discount, on everything you buy.

  15. Sudonum says:

    @ShortBus:
    Your FICO score is a snapshot of your credit at that point in time. If your score is fabulous when you apply for your mortgage you should get a fabulous rate. There is no changing of the rate unless you either signed up for an adjustable rate mortgage (and the rate of change is spelled out in the mortgage), or you try to refinance.

  16. jrdnjstn78 says:

    @nightsweat:
    I would have your wife be the primary person and you as joint applicant. They’ll basically do a check on your wifes credit and then extend her credit, your score should shoot up some but probably not by 100 or 50 if that. I used to have horrible credit, waited my 7 yrs. and then tried to rebuild it. I asked my mom to apply for a credit card and I could be on it too, it helped me out alot.

    @Tux the Penguin:
    I’d be very surprised if you’re credit score is 600 with only a student loan on there. You have to open up some credit accounts and build your credit. Having the student loan is good as long as you’re paying on time. I’d get one credit card if I were you and purchase something small and pay it off.

    be careful with credit because 1 little slip-up can drop your points quicker then you can build your points up. It does suck and it sucks worse that insurance companies use credit to give you insurance!

  17. Canadian Impostor says:

    It took me almost six months to get an entry level credit card because I didn’t get one in college.

    I think it was a little crummy that it took me so long, since I make pretty good money and I worked pretty hard at getting accepted for a card. The real injustice here is when insurance companies use your credit score to calculate your rate. My car insurance plummeted as soon as I had a credit card for six months and my credit score went from nonexistant to pretty decent.

  18. Rando says:

    It may still work but as soon as they update it all that piggybacking history will be gone, period. So it’s kind of useless to even still do it.

    Also, not all credit cards report authorized buyers. If you think about it this makes complete sense because authorized buyers are not finiancially responsible for an account therefore should not get benefits of good reporting or bad.

  19. JustAGuy2 says:

    @Canadian Impostor:

    Car insurance companies use credit scores because, well, it works. Control for age, sex, years of driving experience, driving record, etc., and people with better credit scores have fewer accidents. It can be unfair for individuals (there are always people with lousy credit scores who are great drivers, just as there are 16 year old males who are great drivers), but it works in the aggregate, so the insurance companies make use of it.

  20. mac-phisto says:

    @nightsweat: it doesn’t matter who’s primary as long as the account is being reported correctly as JOINT. i have seen issues with this A LOT lately, & i would imagine there will be more issues as they try to eliminate the piggybacking.

    in the case of a reporting error, only the primary account holder would be reported to the bureaus & the trade entry would be missing from the JOINT account owner. you can rectify this by contacting the reporting company & requesting that they fix the error.

    for those looking to start a person out on the right foot in terms of credit, the “authorized user” loophole is extraneous – simply open a joint credit account to get them started. as an added bonus, you both have contractual liability to the debt, whereas an authorized user is not contractually bound to pay back anything.

  21. Canadian Impostor says:

    @JustAGuy2: I’m referring more to people who avoid credit. I’m not saying it’s a widespread problem, just that the system isn’t perfect and currently does a really bad job dealing with people who don’t join the system really early.

    I got turned down for:
    – Gas companies credit cards you can only use at their stations
    – Store cards to buy clothes
    – Every entry level card offered

    Because I had no credit history at 23.

    I had to go to a college and sign up for one of those college ripoff cards to get my first credit card when I was 23 and earning a substantial salary (I bought a new Volkswagen in cash with my job’s signing bonus.)

    I finally got my foot in the door and I’m apparently convincing soulless corporations that I’m not a maniac, but it’s still a really ugly system that encourages people to get a credit card before they can handle the responsibility of a credit card.

  22. b-real says:

    It’s a shame this loophole is going to be closed. I think one of the greatest things my parents did for me is to get me a credit card on their account when I was 16. It’s kinda funny, because my “credit history” extends to before I was born, according to my credit report. Not being gouged at 25 by high interest rates on student loans and car loans is great :)

  23. mac-phisto says:

    @Canadian Impostor: it’s true that “the system” seems to favor those that attend college, but that’s not really the fault of FICO. banks are, well, banking on the fact that college kids A) have parents with deep pockets, B) will have employment in the future to pay back their balance, & C) will charge recklessly & pay only the minimum in the interim.

    there are other ways to obtain credit – secured loans (make sure the bank/c.u. you use reports the loan! many don’t), co-signers, secured c.c. (RIPOFF)…in your specific case, i would’ve recommended putting a substantial down payment on the vw & taking a loan out for the remainder. make regular payments on that for 6 months – year & that would have given you some good history. most auto dealers will find a way to finance a portion of the loan if you are willing to pay for the majority of it up front. their risk is substantially low if a $5000 loan is collateralized by a $20000 vehicle.

  24. LorenzoFinch says:

    FICO officially dropped the plan to ban piggybacking.

    See the CreditCards.com story announcing it at
    http://www.creditcards.com/credit-card-news/piggybacking-fico-credit-score-a
    uthorized-user-1265.php

    Daniel P. Ray

    Editor in chief

    http://www.CreditCards.com

    dan.ray@CreditCards.com

    8920 Business Park Dr.

    Austin, TX 78759

    (512) 996-8663 x 131

    Read our credit card blog “Taking Charge” at http://blogs.creditcards.com