Brother's got a near-perfect credit score? Go piggybacking
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Dear Speaking of Credit,
Hello. I will try to keep this as simple as possible. I have about a 660 credit score and am looking to up the score. What will happen if my brother adds me to his highest-limit credit card (he has about an 820 score). I do not even plan to use his card, he can keep it so I don't use it. I have a couple of credit cards of my own, I would just like to have his history and high limit added to my account. How will that benefit me? How long will it take? Will it hurt me in any way? And how will that possibily hurt his credit? -- Angel
You've clearly identified one of the two best vehicles, authorized user cards -- the other being secured credit cards -- for building or rebuilding credit scores. Both can be particularly useful for consumers who, due to a low or no credit score, find themselves unable to obtain the credit needed to establish or re-establish good scores any other way.
Since your questions are directed toward using your brother's high limit card to help raise your credit score, I'll limit our discussion to authorized user cards, though you may want to look into how obtaining and properly managing a secured card can also help improve your score.
Adding someone to a card account as an authorized user is a process whereby the primary cardholder, one who either individually or jointly bears responsibility for all charges on the card, allows another person access to the card free of any such responsibility. While typically being a spouse, child or other relative, an authorized user can be anyone chosen by a primary cardholder without restriction by the card company. In recent years, becoming an authorized user on an account to take advantage of the score-enhancing possibilities has come to be known as 'piggybacking'.
My answers to your four questions will follow. I've also added a bonus question for you -- how to extract yourself from being an authorized user -- since at some point you'll want to climb down off the piggyback.
1. How will piggybacking benefit me?
Perhaps even more beneficial than being permitted to use a card without being liable for the debt, piggybacking enables the entire history of someone else's credit card account to be placed on your credit report and, most importantly for credit building purposes, includes this information in your credit scores. Any positive impact to your scores from an authorized user account is most likely to be the result of the lower combined utilization percentage (card balances/limits percentage, making up almost 30 percent of the score) that results when a piggybacked card having low utilization is combined with the higher percentages of your own cards.
2. How long will realizing the benefits of piggybacking take?
Another piggybacking advantage is the speed with which an authorized user account is added to your credit report after the request is made to the card company -- typically within 30 days. In fact, the scoring impact can be so quick that someone who one day has no credit score can achieve a high credit score the next, simply due to an authorized user account appearing on the credit report.
3. Will piggybacking hurt me in any way?
It can. Looking at the flip side of some piggybacking advantages, you'll want to make sure the account on which you're an authorized user remains in good standing. Specifically, the payment history of the account must continue to be flawless and the credit utilization percentage consistently low if the account is to continue helping your score. According to FICO, a late payment by the primary account holder can drop a high score by as much as 100 points, while a single maxed-out card can lower it by up to 45 points. To avoid either scenario, you'll want to protect your score by checking your credit reports at all three national credit bureaus -- Experian, Equifax and TransUnion -- periodically to make sure the authorized user card is doing its job.
4. Can piggybacking on my brother's card hurt his credit?
While, as noted, mismanagement of the piggybacked card could negatively impact your credit score, there will be no risk to your brother's credit score from this arrangement, since you won't be using the card and nothing on your credit report will ever have any effect on his 800+ score.
5. How can I remove an authorized user account from my credit report and score?
I've added this question and answer as a remedy should you find that the piggybacked card is doing your score more harm than good or, for personal reasons, it would be best to terminate the relationship. Fortunately, authorized user accounts can easily be removed from your credit reports at any time, simply by following this two-step process:
- You or the primary cardholder can contact the card company to have your name removed from the account and the account removed from your credit reports.
- After contacting the card company to remove your name, you can help to ensure the timely removal of the card from your credit reports by filing a dispute with each credit bureau, requesting that the account be removed from your credit report since you are no longer an authorized user and the account does not belong to you.
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