July 2014 – Regarding “Piggybacking”…
“Piggybacking” is when a friend or family member (someone you know and trust) adds you as an authorized user to one of their existing accounts. This is typically done to add positive credit to your credit file so the credit score with all 3 credit bureaus (Equifax, Experian and TransUnion) can go up.
A few things to keep in mind if considering piggybacking credit with someone:
* only positive accounts (which include never being late in the past 7 years) should be used to improve scores via piggybacking
* all party members are subject to any violations of the agreement (meaning that if the payment ever becomes late it negatively affects everyone’s credit)
* all party members can be held liable for the balance if the account ever becomes past due and if the creditor cannot reach the primary on the account they can go after any authorized users for the payment
Regarding buying trade-lines…
Buying a trade-line works like this: Someone with bad credit pays a company to be matched up to an account in good standing. The bad credit client has no access to the unblemished credit line, but their credit score benefits merely from the association. In return, the holder of the account in good standing is paid a fee by the repair company for allowing an authorized user to be added.
A few things to keep in mind if considering buying a trade-line:
* there are some fraudulent companies out there who will take payment for the service and never actually connect their “clients” with a positive trade-line… they then take what money they’ve made and “disappear” thus making it pretty much impossible for their “clients” to get a refund or even to sue for the lost money
* there are some companies who will take money for the service, add the trade-line to the credit, but remove it again once they believe the client is satisfied that it’s been reported and many consumers may never check their credit again to realize it has been removed
* if the lender suddenly is unable to track down the other party members on the account, the added authorized user (although they never actually had access to the account) can be held liable for the debt
Buying trade-lines is skirting the law. The Credit Guru recommends against buying trade-lines both because of the fact this does fall into a grey area with credit reporting laws, the risks involved in finding a legitimate company who will uphold their end of the deal and also because of the risks involved for liability of the account.
Some other considerations…
Balances do also play an important role in calculating a credit score. Having additional positive accounts reporting can actually damage credit if the account is ever close to or above the limit. The increase in “total debt” (all balances on a credit file added up to a single sum) also can lower credit scores. So not all cases of additional credit are good.
Having no control over the account or how it may report in the future is a great risk even if you are piggybacking with someone you know. If you are on an account and it becomes late that late legitimately reports against you, even if you then close the account by removing your name from it.
When establishing new positive credit The Credit Guru recommends first looking into opening a regular account in just the consumer’s name, or if necessary consider opening a secured account which has lower credit score requirements (though often additional fees from a regular account).