Credit Score Piggybacking Saved From Death

Piggybacking is back in, baby. FICO was all set to terminate the credit-score boosting technique of adding another authorized user to an account held by someone with good credit, but they demurred. Piggbyack away, little money pigs. Here’s how it went down…

CreditCards.com reports that FICO announced it changed its mind during Congressional testimony yesterday.

Back in the day, adding an authorized user to your account was mainly used by parents to help their kids develop better credit scores. As the housing bubble ramped up, private credit score boosting companies would “rent” authorized user slots to strangers with poor credit so they could qualify for loans they shouldn’t have. It was a contributing factor to the subprime meltdown. When FICO developed a new scoring system, FICO 08, in direct response to the credit checking industry’s failure to accurately check and score credit, they said they were going to kill piggbyacking.

“Fortunately, we were able to come up with technology that makes it much harder to game the system,” said Mike Campbell, FICO COO.

That’s good news for responsible consumers looking to get better rates on their credit cards, mortgages, and other loans.

‘Piggybacking’ gets stay of execution from FICO [CreditCards.com]
(Photo: Special*Dark)

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  1. stronty says:

    I just read this and I really didn’t get any useful info, sounds like spin to me.

  2. dako81 says:

    How much technology could it possibly take to prevent “gaming the system”?

  3. ShortBus says:

    @dako81: I’m guessing it’s as simple as cross-referencing the credit files of the account owner and the AU. If the people don’t share a last name, addresses (or once shared an address), etc. then the system disregards the trade line in the AU’s score.

  4. Juliekins says:

    My husband and I used this technique to improve his credit score. He was finishing paying off some youthful indiscretions when we got married and his credit was lower than mine, so I added him as co-account owner instead of just an authorized user on all my cards. It helped. There are legit uses for piggybacking, so I’d hate to see it go away completely.

  5. BrianneG78 says:

    Darn, I’ve been trying to get rid of some “authorized user” cards on my credit report for at least a year now. I was hoping they would just go away, but now I have to fight harder. My mom gave me an emergency credit card in college, but now it has the largest balance and the only late payment on my credit report.

  6. jtheletter says:

    @Juliekins: Do you, or anyone else, have some links on how to use this technique in such a fashion? I’m in the exact situation with my fiance, her credit is pretty bad due to a snafu many years ago repaying a college loan, but mine is stellar.

  7. Snakeophelia says:

    I’d like to know more about this, too. My husband’s credit is stellar, and mine, not so much (but steadily improving). I wonder if it’s worth it to try to piggyback on his – how soon will I see the positive impact? And would he see a negative impact?

  8. Tankueray says:

    I’ve been wondering why Capital One has been sending me letters to add authorized users to my account. (You’ll get more points!) I’ve gotten three such offers since the first of July. I thought this was all over with, I guess Cap One knew something I didn’t.

  9. evilcharity says:

    My husband and I improved my score nearly a hundred points over the course of about six months. He made the calls, but I assume he added me as a shared cardholder (I have my own cards with my name on them and slightly different numbers). It really does work and only takes a phone call or two.

  10. ShortBus says:

    @BrianneG78: Dispute the tradelines with the credit agencies as “not mine”. You should be able to get them removed if you’re just an AU. (See below for the reasons why)

    Just to clear up some confusion here, folks: There’s a difference between being an joint-account holder and an authorized user. Opening a joint account with someone is akin to co-signing on a loan. If one of you defaults on payments, you’re both equally on the hook (and likely to be sued). An “authorized user” is just that–you’re authorizing a person to run up your account. But that person has no legal responsibility in paying on that debt.

    “Piggybacking” generally only refers to adding an AU to an account since the AU is getting all the privileges without the legal responsibility or the credit check. When you apply for a joint account, the credit histories of both applicants is generally considered (though that can vary from lender to lender).

  11. Ariah says:

    That photo is adorable.

  12. 420greg says:

    I was worried about this. It would have been bad in my case.

    All the credit cars and loans are in my name and my wife is just listed as the AU> Her credit was terrible when we met. All of her bad stuff has fallen off so the only things left are my good accounts.

    When we were to need a loan and they pulled our reports our score would be similar.

    If this went thru her scores would vanish. And since mortgages can be based on the low middle score, we would have been screwed. Our financial situation would not have changed, but this one change by FICO could prevent us from getting a mortgage.

    My EQ went from 790 to 740 last time they messed with the formula in 05.

  13. jessicat says:

    When I first hit my college quad, I was bombarded with credit card applications. I filled them all out (got some pretty decent swag in return) and received 4 shiny new cards in a week. “Emergency only” charges became booze runs and…well…booze runs. By the time I graduated my credit card debt was as bad as my student loan bill. I got them paid of and my folks let me “piggyback” my way to a decent credit score. If it weren’t for that, I couldn’t have even rented an apartment. Guess Mom and Dad were willing to do anything to keep me from moving back in.

  14. Parting says:

    Does it work in Canada?

  15. Hmm. I smell a rat.

    The credit card companies must likey muchey the way things were for some reason. Fair Isaac doesn’t just drop something like this suddenly and then announce, “Oh yeah, we figured out a better way.”

    Follow the money, I say.

  16. drdom says:

    There’s a real beauty to all of this. The only people who completely understand the FICO system is FICO, and a few select people at the major credit rating organizations. Because of the “complexity” and “proprietary nature” of FICO’s system, there’s no way for anyone outside FICO from knowing if someone is gaming the system or not.

  17. bonzombiekitty says:

    @Tankueray: With more authorized users, the more money is likely to be spent on the card. The more money you spend on a card, the more likely you are going to carry a higher balance and make the CC company more money.

  18. Norcross says:

    My wife and I did this, since my credit was shot when we got married (I had a bad habit of buying whiskey instead of paying bills). Since that point, my credit has gotten considerably better, while at the same time hers nosedived, mainly due to her student loans coming on her credit to the tune of $170,000. Party.

  19. lpranal says:

    Game the freaking system, it’s been gaming us for years and years. My credit card company just doubled my rate, in hopes that I’ll use it for frivolous spending / and or indebting myself because of the economy, and make more money off me. All it’s going to do is let me rack up more cashback rewards as I pay it off every month.

    This one’s for you credit card companies

  20. secgeek says:

    I was strictly debit only for the last 6 years… When my wife and I wanted to buy a house my credit was ridiculously low (non existent). Hers was OK, but too new for us to use her FICO.

    I got AU on one Amex from my Mom and one from my Dad. I’m the only one that uses both cards as of about a year ago. They are both on my FICO report, but because its only been about a year hasn’t boosted it by much. The upside the only negative thing on my report accounts too new.

  21. maddypilar says:

    So, does piggybacking negatively affect the card holder with the good credit? I’m assuming no, otherwise people wouldn’t be able to sell 10 slots to AUs – since their scores would get lowered every time they added a low credit score AU. Am I wrong? If it is sticking around my awesome credit score might help out a family member in the near future. It was in the plan before they said they were getting rid of it. I guess it’s back on.