Your credit score is a three-digit number that shows how responsible you are with money. With solid credit, you can lock in great deals on loans, credit cards, insurance premiums, and other financial products. You may even save hundreds or even thousands of dollars over your lifetime.
On the flip side, bad credit can make it difficult to qualify for products with favorable interest rates and terms. If you’d like to boost your credit score, credit card piggybacking is one method you may consider. So, what is piggybacking, and how does it work? Keep reading to find out.
What is piggybacking credit?
Piggybacking credit is when you become an authorized user on another person’s credit card to increase your credit score. This differs from being a joint account holder because you won’t be legally responsible for charges made on the credit card. Despite this, the entire account history will be reflected on your credit card account.
If the account has been around for a while and has consistent on-time payments and a low utilization rate, your credit score may improve. However, piggybacking will negatively impact your credit score if it’s a newer account with multiple late payments and a high utilization ratio.
Piggybacking Credit Methods
In general, there are two ways you can piggyback off someone else’s credit: traditional piggybacking and for-credit piggybacking.
Traditional piggybacking is when you ask a family member, close friend, or significant other with established credit to add you as an authorized user. This is also known as person-to-person piggybacking.
If the credit card issuer reports to the major credit bureaus, the primary cardholder’s payment record will show up on your credit reports. In this scenario, you don’t need to use the credit card for piggybacking to work. The person who added you as an authorized user doesn’t even need to give you a credit card.
For-profit piggybacking is when a tradeline credit company helps you piggyback as an authorized user on someone else’s credit card. In exchange for a fee, the company will connect you to a cardholder with excellent credit and add you to their card. The cardholder will get compensated with a portion of your fee. However, you won’t receive the physical card or be able to use it.
For-profit piggybacking services or so-called tradeline renting may be a suitable option if you cannot piggyback off a friend’s or family’s credit. Just keep in mind that for-profit credit piggybacking can be a risky endeavor as you’ll be dealing with someone you don’t know.
These people are usually just trying to earn some money from their good credit and using a for-profit business to facilitate the transaction. Typically, for-profit credit piggybacking is only used when traditional piggybacking isn’t an option.
How does piggybacking credit work?
Before we dive into how piggybacking works for establishing credit, let’s go over the basics of credit scores. Credit scores are influenced by five key factors. They include payment history, credit utilization, length of credit history, credit mix, and new credit. Essentially, your credit score measures how you’ve managed your debt.
When you piggyback or become an authorized user on another person’s credit card, their account will appear on your credit report. But future lenders will know that you’re an authorized user, rather than a primary user or account owner. Furthermore, your credit limit will increase and may lower your credit utilization ratio, if the card maintains a low balance.
In addition, your credit history length may increase or decrease, depending on how long the credit card has been open. A longer credit history is ideal as it shows you’re more experienced with managing credit. Last but not least, piggybacking gives you credit for the cardholder’s consistent, on-time payments.
History of Piggybacking Credit
So, how did piggybacking come about? Years ago, it was difficult for women to receive their own credit cards or establish their own credit. This is because they had thin credit files because they had used and often helped pay off credit cards with their spouses as the primary cardholders. In 1974, the Equal Credit Opportunity Act was passed to make it illegal for creditors to discriminate based on race, religion, gender, or marital status.
The Federal Reserve Board issued Regulation B to implement it. According to Regulation B, creditors must report authorized users who are spouses of cardholders to credit reporting bureaus. In addition, they have a legal obligation to consider the credit from joint and authorized user accounts when they make credit decisions for either spouse. This can help an authorized user’s credit score increase.
Here’s the loophole: When creditors report an authorized user’s credit, they don’t state whether they’re the spouse of the cardholders. As a result, authorized users can be their children, cousins, friends, or even strangers. They may still reap the benefits of being an authorized user, regardless of whose credit card they’re using.
Does piggybacking really work?
In a perfect world, piggybacking credit would always work. If you piggyback on a credit card that reports data for authorized users, you might notice a small boost in your credit. But not all credit card companies report authorized users so you may not always reap the benefits of piggybacking.
Credit Card Companies That Report Authorized Users
Before you become an authorized user on a credit card, it’s in your best interest to call the credit card company and find out how they’ll report your credit activity. Hopefully, they’ll be forthcoming and reveal this information to you.
These common credit card issuers have been known to report the primary cardholder’s activity to the credit reports of authorized users and joint account holders. They make it easier for an authorized user’s credit score to go up.
● American Express
● Bank of America
● Capital One
● Wells Fargo
● U.S. Bank
● Synchrony Bank
In some cases, piggybacking can do more harm than good. Remember that you have no control of how the primary cardholder or account owner spends their money and repays their debt.
Just because they’re proven to be responsible in the past doesn’t mean they will continue to make on-time payments and maintain a low credit utilization ratio. There have been many instances where a primary cardholder falls off their good credit streak because of a life event, like a job loss.
How Piggybacking Affects Credit Scores
The purpose of piggybacking is to build credit or improve your credit score. To explain how it might do so, let’s take a closer look at the factors that make up your FICO score, which is one of the most widely used credit scoring models.
Your payment history makes up 35% of your FICO score. It indicates whether or not you make on-time payments on your credit cards, mortgage, car loans, student loans, and other bills. If you become an authorized user on someone else’s account and they make time payments consistently, your credit score will benefit from their positive payment history.
Credit utilization reveals how much of your available credit you actually use. It makes up 30% of your FICO score. To calculate your ratio, add up all your outstanding balances, divide them by your total credit limits, and multiply by 100. A credit utilization of less than 30% is ideal.
When you become an authorized user, your limit will increase. As long as the primary cardholder doesn’t spend too much on the card, your credit score may go up a bit. On the other hand, if they overspend on it, you may actually hurt your credit instead.
Length of Credit History
The length of time each of your credit accounts have been open represents 15% in the FICO scoring model. If your credit card accounts have been open for a while and you’ve made on-time payments on them, your credit score will increase. If you piggyback on a credit card with a long credit history, you’ll be able to increase your average credit age and improve your credit as a result. Being added to a fairly new account will have the opposite effect.
Who is piggybacking for?
Piggybacking might make sense if you have no credit or minimal credit history and are looking to build credit or improve it. By piggybacking off someone with a solid credit history, you might be able to improve your credit score faster. This strategy is particularly worth considering if you don’t have to use authorized user tradelines and can find a trustworthy friend or family member who will let you become an authorized user on their card.
Just make sure they have an established credit history and you’re confident they’ll continue their good credit habits. Otherwise, you won’t benefit from the primary cardholder’s payment history.
Risks of Piggybacking
At first glance, piggybacking might seem like the ultimate solution if you’d like to build or improve your credit. But before you take the plunge and become an authorized user on someone else’s credit card accounts, it’s important to consider the risks, which include:
- You must share your private information: The credit card issuer will want to know your name, address, and Social Security if you want to become an authorized user or joint account holder. Of course, sharing this sensitive information can put you at risk for identity theft or what’s considered bank fraud.
- Lenders don’t always approve: Your credit score tells lenders how responsible you are with debt. They might be less likely to approve your credit request if they find out you paid to be an authorized user on someone else’s credit card account.
- You may hurt your credit: Ideally, everything will go as planned and credit card piggybacking will be the ideal building credit strategy and help you earn a good credit score. But if the primary cardholder makes late payments, for example, you may hurt your credit instead.
- You might miss the chance to practice healthy habits: The best way to build and maintain strong credit is to live below your means, spend wisely, and contribute to a savings account. You must also keep up with your student loan payments, and repay all your credit card balances and bills on time, every time. If you rely on piggybacking, you may not give yourself the opportunity to learn healthy financial habits.
How long does it take piggybacking to work?
Piggybacking won’t give you instant results. Typically, the primary cardholder’s account history will appear on your credit report within 30 days. But it may take longer.
Reports from those who have tried piggybacking state it took about 60 or more days for them to notice a positive change in their credit scores. Remember, the credit card company must report your credit activity as a primary account holder. Otherwise, piggybacking will have no impact on your credit.
Other Strategies to Improve Your Credit
Piggybacking through loved ones with good credit or for profit piggybacking services is one way to improve your credit scores. To establish and maintain good credit scores, use a combination of these strategies. These are proven strategies that come with fewer risks like bank fraud.
- Dispute errors: Visit AnnualCreditReport.com to pull free copies of your own credit report from the three major credit bureaus, Equifax, Experian, and TransUnion. Check the reports closely and dispute any errors or inaccuracies with the appropriate bureau as they may be bringing down your score.
- Consider a credit builder loan: A credit builder loan is exactly what it sounds like: a loan designed to build credit. It differs from a traditional loan, however, because you’ll make fixed payments to the lender who will report them to the credit bureaus. You’ll be able to access the loan amount at the end of the term.
- Apply for a secured credit card: If you don’t have a credit record, a secured credit card account may a great strategy for building credit. You’ll have to put down a deposit that acts as collateral. As you make your payments, the credit card issuers will report them to the credit rating agencies. You’ll get your deposit back once you close your account. Secured credit cards are definitely worth considering if you have a thin credit file.
- Repay your debts: Make every effort to repay any outstanding debts you might have. If you’re overwhelmed with debt on multiple credit accounts, consider debt consolidation, credit counseling, or DIY methods like the debt snowball or debt avalanche.
- Pay bills on time: Late or missed payments can take a toll on your credit and entire history. Make it a priority to pay all your bills on time. If you lose your job or are unable to make a payment for any reason, reach out to the company right away to discuss potential solutions. You might be able to make a partial payment or defer your payment.
- Work with professionals: If you have negative items on your credit report, professional credit repair companies can potentially help you remove them. They can help you with all kinds of other credit-related issuers too. Check out our top picks. (None of the credit repair companies that we recommend offer credit card piggybacking services.)
Piggybacking credit or becoming an authorized user on someone else’s credit account might help your credit. You should weigh the pros and cons of traditional piggybacking and for-profit piggybacking before you move forward with this strategy. Furthermore, remember that you must pair it with other credit boosting methods to see a significant and long-term change in your credit.