Many Americans have poor credit. If you’re one of them, you can boost your credit score and improve your overall financial standing in various ways.
If you’re in a rush to get an increase in your credit score, one of the quickest ways to do so is to piggyback on someone else’s credit. This strategy, called “credit card piggybacking,” could help you benefit from another person’s excellent credit scores to bump up your own credit report.
Does credit card piggybacking still work?
Yes, credit card piggybacking still works. While many financial institutions and credit bureaus frown upon this practice, especially on for-profit credit piggybacking, it remains a valid method that you could try to boost your credit.
The results aren’t always the same, though. Some people benefit more from credit card piggybacking than others so it will depend on your current credit standing.
What Is Credit Card Piggybacking?
The term “piggybacking” means to be carried on the back of another person. It’s usually a term used with children who get piggyback rides from adults so they don’t have to walk or exert effort.
That is the same concept when you piggyback on someone else’s credit card account. You’re essentially benefitting from another person’s good credit to improve your credit standing.
How do you piggyback on another person’s credit card account?
To piggyback on someone else’s credit report, you need to become an “authorized user” on the credit card of someone with an excellent credit standing. When you become an authorized user, this means you’re allowed to use the credit card of the primary cardholder.
The good credit history of the primary cardholder on that particular credit card account will immediately reflect on your own credit report.
Two Types of Piggybacking
There are two types or methods of piggybacking credit. The first one is the traditional way of becoming an authorized user on the credit card of a person you’re related to or acquainted with. The second type is a for-profit piggybacking service also known as buying tradelines or tradeline renting.
1. Traditional piggybacking
Being an authorized user on another person’s credit card has been a long-time practice. Usually, spouses and children are given the authorization to use the credit card of the primary account holder.
Aside from having the ability to use the available credit, another added benefit is that it can help boost the authorized user’s credit score.
Eventually, many parents would add their children as authorized users to help them in building credit. It’s also possible for a credit card holder to add other friends or associates as authorized users to the credit account.
This method is often referred to as a “traditional piggybacking” method because, in this scenario, the two parties are related or at least acquainted with each other.
2. For-profit piggybacking
What if you don’t know anyone with an excellent credit score? One loophole that credit repair companies found is that you don’t need to have familial ties to a primary account holder to be added as an authorized user.
This started the practice of buying and selling “authorized user tradelines”, which involves credit card holders with excellent credit adding strangers as authorized users to their card for a fee. The price of buying authorized user tradelines varies depending on how excellent and how old the credit card is.
Usually, what happens is that the person buying the tradeline doesn’t actually receive the supplementary credit card and won’t have access to the credit card account at all. The owner of the account will hold on to the authorized user’s credit card and will remove the person after the agreed period or after the increase in the credit score is seen.
How Credit Card Piggybacking Works
Being an authorized user of someone else’s credit accounts can do the following:
1. Immediately Increase Your Available Credit
Your available credit line is the amount of money you can borrow. For example, the available credit limit of the credit card that you’re an authorized user of is $5,000, then that amount will also be added to the available line of credit that you have. If the primary card owner sets a spending limit, that will be the amount added to your available credit.
2. Decrease Your Debt To Credit Ratio
When you become an authorized user, this will not decrease or increase your existing debts. The good news, however, is that since your credit utilization ratio will increase, this will lower the ratio of your debt in relation to your available credit. The credit utilization ratio is the amount of debt you have in proportion to the amount of money you can borrow.
3. Increase The Average Age Of Your Accounts
Another way that being an authorized user can help you build credit is if the account has been opened for several years and has been in good standing. Usually, the older the account, the better.
When an account has been opened for a longer period, this signifies that the account is more established and trustworthy. So let’s say the account holder had the credit card for over 10 years, this could help your credit too.
4. Improve Your Positive Payment History in Credit Report
Being an authorized user on a credit card with a positive payment history could also reflect well on your own credit rating. That’s why if you want to piggyback on another person’s credit, you have to make sure that this person is diligent in paying for their credit card bills.
Risks Of Credit Card Piggybacking
The risks go both ways for the account owner and the authorized user. As the owner of the account, you’re legally responsible for paying all the purchases on your card, including that of the other user you authorized. You should practice precautions to ensure that things work well for both of you and you have financial protection.
Meanwhile, the authorized user also faces risks because you’ll rely on the account owner’s activities. If the account owner has late payments and becomes delinquent in using their credit card, it can also hurt your score.
If you’re buying a tradeline, there are also risks involved. First, you’re not really sure who these people are so what is your guarantee that they can really help boost your score?
There are also risks of bank fraud, being scammed, or identity theft since you’re giving your information to strangers. You might also come across credit builder loan companies that provide empty promises without enough proof to back up their claims.
Can Credit Card Piggybacking Help Build Credit Scores?
Credit piggybacking or becoming an authorized user on the credit card of a person with excellent credit can help boost your credit score. The next question is, how much can you gain if you do this?
It depends on different factors. First, you have to consider the credit history of the primary credit cardholder. Since you’re piggybacking on that person’s credit, the impact will obviously depend on whether their credit can actually influence your score.
For example, piggybacking on someone with a 10-year-old credit card that has a spending limit of $20,000 will have a different effect compared to piggybacking on another person with a 2-year-old credit card and a $1,000 limit. You also have to make sure that the primary account holder’s card is not maxed out and has a positive payment history.
The second factor will be your score before you piggyback on someone else. Depending on your current credit standing, the rate of improvement can be lower or higher.
This was evidenced by findings from a Federal Reserve Study that showed that the average increase is 22 points when you become an authorized user. However, the study also found that people with “thin credit files” (little or no credit history) seem to benefit more from piggybacking as the credit score increase could range between 44 to 64 points.
Again, the number of points that you could gain from becoming an authorized user will depend on your current credit standing and the credit history of the account holder you’re piggybacking onto.
When can you use this strategy to your advantage?
Your credit score is an important metric that lenders and creditors use to determine whether or not they should lend you money. If you have a good score, you can enjoy more favorable deals and interest rates from credit card companies on different financial services and products, including personal loans.
You can save a lot when you want to get approved for a cellphone, get a mortgage, or apply for a personal loan. On the other hand, having a low score could hinder your approval odds for even the smallest credit applications.
If you find yourself in the same situation and you want to improve your credit score in a short period of time, you could consider piggybacking on another person’s credit. This could be helpful if you have done everything else to repair your credit but you still have not hit your target score. Or perhaps if you’re in a rush to buy a house or a car.
For example, if you have little or no credit history, you might have a hard time getting approved for an FHA mortgage loan. While the credit score requirement is said to be as low as 500 to 580, many lenders only consider applications from people with a 680 score. If you piggyback on someone else’s excellent credit, this could help boost your score to the next tier, enough to get your application approved.
Is Credit Card Account Piggybacking Legal?
Can you get in trouble for credit card piggybacking? Are there risks from using this method of boosting your credit record? Many people are wary about piggybacking on someone else’s credit because they’re not sure whether this is safe.
Is this practice illegal? No, it’s not illegal to become an authorized user on another person’s credit card.
However, many financial institutions frown upon piggybacking credit practices, particularly for-profit methods. Even FICO, which is the financial institution responsible for calculating credit scores, initially tried to remove authorized user credit lines as a factor in their credit scoring models. However, FICO eventually had to reverse its stance.
For-profit tradeline companies argue that the presence of the Equal Credit Opportunity Act of 1974 (ECOA) is the reason for this. This act prohibits creditors from discriminating against credit applicants based on the person’s marital status, race, age, nationality, gender, or religion. So even if you’re not married to another person, you can still be an authorized user and your authorized user tradeline should be considered as well.
If you’re to become an authorized user on a family member’s credit card, this is less suspicious to banks and financial institutions.
FAQs on Credit Card Piggybacking
1. Does adding someone to your credit card hurt your credit?
Adding an authorized user to your credit card by itself doesn’t have a negative effect on your credit. It can only hurt your credit when the authorized user becomes irresponsible in using your card.
2. Does being removed as an authorized user hurt your credit report?
Yes, removing yourself as an authorized user can negatively affect your credit score. It will no longer appear on your report, which impacts the length of your credit history.
Improve Your Credit Score The Safe Way
Piggybacking on someone else’s credit still remains a legitimate way to boost credit scores. It is best, however, to personally know the account holder you want to piggyback onto rather than trusting your credit to the hands of strangers from piggybacking companies. If you don’t have a choice but hire tradeline companies to provide this service, do your research well, and read customer reviews to make sure they can actually help you boost your bad credit score.
Aidan has been writing about personal finance for over 6 years. Prior to this, he worked as a Corporate Finance Analyst where he specialized in Due Diligence, Company Valuations and more. He is a CFA charterholder.
