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Can You Still Piggyback to Boost Credit?
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A good credit score is key to your financial future, and establishing good credit takes time. For some, the practice of “piggybacking” — becoming an authorized user on a trusted friend or family member’s credit card — has been a shortcut to building that essential credit history.
The way it works is simple. By piggybacking on someone else’s account, an authorized user gets credit for the primary cardholder’s responsible behavior, like paying bills on time and maintaining a low credit utilization ratio, without actually having to make payments. Parents will often let their adult children piggyback on their credit cards to give them a financial head start.
But shady credit repair companies have sought to exploit the piggybacking arrangement. These companies charge credit-deficient consumers for the opportunity to become an authorized user on a stranger’s account. In response, creditors have taken steps to crack down on piggybacking, tightening the rules and adjusting their scoring formulas.
So, can you still piggyback to boost your credit?
The benefits of piggybacking
When a friend or family member adds you as an authorized user, you may receive your own card and access to some card features, but you aren’t responsible for the payments. The burden of paying falls solely to the primary cardholder. When the primary cardholder pays on time and maintains good credit, that helps an authorized user build their score as well.
Who benefits the most from piggybacking?
Piggybacking arrangements are typically used to benefit several types of people:
Young adults. For college students, recent grads or young adults, being added to a parent or close family member’s account can be a path to establishing credit, as long as the primary cardholder has good credit and strong financial management.
Spouses. If your spouse has solid credit but you do not, becoming an authorized user on your spouse’s card can help boost your score.
Elderly parents or retirees. Retirees and older parents may piggyback on their child’s account if they need help qualifying for auto or home loans.
It’s not just the authorized user who benefits from piggybacking. The primary cardholder may also earn additional perks or mileage rewards associated with the authorized user’s spending. And there’s always the personal satisfaction that comes from helping friends or loved ones improve their credit.
But there are risks, as well.
The risks of piggybacking
While piggybacking can help almost anyone build credit, everyone in the arrangement assumes some level of risk.
If you’re the primary cardholder
As a cardholder with good credit, you have worked hard to establish a strong financial profile by paying your bills on time, keeping your debt levels low and monitoring your budget. By adding a piggybacker, you’re taking responsibility for that person’s spending habits. If your authorized user goes on a spending spree, you will be on the hook for those payments.
There are steps you can take to reduce that risk. For example, you can add an authorized user without actually giving them a card or charging privileges. And some credit companies will allow the primary cardholder to set spending limits or otherwise restrict an authorized user’s activity.
If you do decide to remove an authorized user, you will need to call your credit card company and request that person be taken off. It’s also a good idea to call the three credit reporting agencies to confirm the authorized user was removed and will no longer affect your credit scores.
If you’re the authorized user
Once you become an authorized user, your credit is linked to the primary cardholder. That can be a good thing if the cardholder is responsible. But it can hurt you if the primary cardholder misses payments, incurs late fees or struggles to pay off credit card debt. Once the lender reports this behavior to the credit bureaus, it could negatively affect your score.
As an authorized user, it’s important that you trust the primary cardholder and have a strong understanding of their financial habits, credit history and profile. Remember, you can’t make any changes to the account — including removing yourself — unless the primary cardholder gives you access. So be careful never to piggyback with someone you don’t fully trust.
Does it always work to build your credit?
The short answer is maybe. Not all banks and creditors will give a piggybacker credit for the primary cardholder’s activity, so it is important to check before you sign on. Some smaller banks, such as Credit One Bank and Merrick Bank, for instance, only report an authorized user’s account activity if they are the primary’s spouse. But several big lenders, including American Express, Capital One, Navy Federal Credit Union and Chase, report all authorized users’ activity to the credit reporting agencies. Check with your credit card company or bank to inquire about its specific policies.
Is piggybacking still an option?
Credit bureaus and credit card companies have tried to crack down on the piggybacking arrangements sold by credit-repair companies. And it’s not hard to see why. Unlike asking a trusted friend or family member if you can benefit from their credit, these arrangements put you at the mercy of a stranger. Meanwhile, the credit repair companies collect high fees for delivering little to no value.
“The primary account holder has all the control, and whatever negative actions they have that impact their score, it can impact you as well,” said Nathalie Noisette, founder of Boston-based credit counseling service Credit Conversion. Additionally, you usually can’t unwind the relationship without the primary cardholder agreeing to remove you from the account.
In many instances, Noisette said, clients have come to her after purchasing a piggybacking arrangement from a credit repair agency that had no discernible impact on their credit score. Unable to close their accounts, these clients ended up frustrated and in worse financial condition than when they started.
More than a decade ago, following complaints from lenders, the Fair Isaac Corporation, the company behind FICO scores — the most widely used credit-scoring system — announced it would no longer include authorized users in its formula. The company reversed that decision in 2008 amid concerns it potentially violated the Equal Credit Opportunity Act, which prohibits credit discrimination and requires that a spouse who is an authorized user be reported to credit bureaus.
Still, the new FICO score, called FICO 8, did include changes to how piggybackers are scored. All FICO scores now include authorized user accounts, but FICO 8 gives them less weight.
Today, piggybacking continues, with trusted acquaintances as well as strangers provided by credit-repair companies. But efforts to curb for-profit piggybacking continue as well. For example, Chase now requires primary cardholders to confirm they have a relationship with their authorized users. If Chase finds out otherwise, it says it reserves the right to close the account.
Be careful out there
If you’re looking to rebuild your credit or establish a credit history, piggybacking can be a viable route to a stronger financial position. The most important thing is to have an honest conversation with a trusted friend, family member or co-worker before entering into a partnership. When the relationship between an authorized user and a primary cardholder is based on trust and transparency, it can bring considerable benefits to both parties. But paying for piggybacking is all too likely to backfire.