Piggybacking is still an option, but proceed with caution
Dear Credit Score Report,
My husband and I are trying to build/rebuild our credit
and were wondering if "piggybacking" is still an option. We have read
several places that FICO no longer recognizes it. -- Jessica
Hey Jessica,
If you're looking to
help boost a credit score, piggybacking as an authorized user on a spouse's
credit card account remains an option.
Assuming the primary
credit cardholder has a solid account history -- with a record of on
time-payments and low balances, for example -- the other spouse can benefit from
being added to that credit card as an authorized user, also known as piggybacking. However, Jessica, those
articles you read weren't exactly wrong when they said FICO no longer
recognizes piggybacking. That's because while earlier versions of its scoring
model (which are still used by most lenders) allow for all types of piggybacking, FICO's newest scoring model
differentiates between authorized account sharing and a second, somewhat shady form of
piggybacking where consumers pay to become authorized users on a stranger's
credit card.
"If we're talking about piggybacking in terms of the
buying and selling of trade lines to improve one's score, FICO doesn't
recommend that or recognize it in the newest FICO scoring model, FICO 8,"
says Barry Paperno, consumer operations manager for myFICO.com.
Just as prior versions did, FICO 8 --
introduced in 2009 and previously known as "FICO 08" -- allows
consumers to benefit from their status as authorized account users. "The [authorized]
account will appear on your credit report and will be treated no differently by
the FICO scoring formula than any other accounts that appear on your
report," Paperno says. That can help the authorized user's FICO score when
the primary cardholder has a lengthy, positive credit history. Of course, if both
you and your husband have poor credit histories -- too many late payments or
maxed-out cards, for example -- adding the other spouse as an authorized user
probably won't help your FICO scores.
Faced with that situation, some consumers will pay
questionable "credit repair" companies that charge borrowers for the
opportunity to piggyback on a stranger's superior credit history. While that method differs significantly from helping a child or spouse, the goal of both
piggybacking approaches is the same: to improve the authorized user's credit history
without hurting the primary cardholder's credit. Earlier FICO scoring models
included both types when calculating a credit score until lenders became
worried about the growth of "pay to piggyback" credit repair schemes.
FICO 8 was designed to address lenders' concerns, while still permitting family
members' FICO scores to reflect their status as authorized users.
In addition to being ethically questionable, paying to piggyback is also a legal gray area. "This is one of those questions for which there is no black and
white answer," says Chi Chi Wu, staff attorney for the Boston-based
National Consumer Law Center. "There is nothing explicitly illegal
about it, but I think some lenders feel like it is a form of
misrepresentation."
So how can FICO tell whether someone is a legitimate
authorized user or a piggybacking payer? The latest scoring model "will
look for certain patterns that are typical for illegitimate authorized user
accounts," Paperno says, although FICO -- protective of its proprietary model -- won't say just what those patterns are. Once identified, however, those accounts won't be counted
toward the calculation of your FICO score.
Still, despite FICO's innovation, those earlier scoring
models remain more widely used. That could eventually change, of course, as
banks increasingly rely on FICO 8. However, lenders can be slow to change, so movement toward new scoring models will likely proceed at a glacial pace.
Rather than concern yourself over which FICO model each individual
lender is using, Jessica, my advice for you is to play it safe: Have the spouse
with the weaker credit history added as an authorized user on the other's
account. Meanwhile, continue to keep all account balances low, pay your bills on time and take on new credit only when necessary.
After all, you want to stay on the credit industry's good
side, since it's their approval that's required for mortgages, credit cards and
other types of loans.
Good luck!
-- Jeremy
See related: Help for bad credit, Long-awaited credit scoring revisions unveiled, Piggybacking gets clemency from FICO, Cardholders' mistakes can bring down authorized users' credit score, The good guys of credit repair, Piggybacking, meant to jump-start credit, can backfire
Jeremy M. Simon is a former CreditCards.com reporter who wrote about credit scoring, economic data, credit card crime and other issues. He is based in Austin, Texas. He is a graduate of Vassar College and has previously worked for Thomson Financial in New York City, where he wrote about the stock markets, and Texas Monthly, as well as several publications in Austin.
Send your question to The Credit Score Report.
Published: February 2, 2010
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