"Piggybacking" crackdown…
Special Contribution Article
In anearlier blog about credit repair I had talked about a method of improving one’s credit score by “piggybacking” on someone else’s good credit. The theory is simple, and here’s one example: a student with virtually no credit wants to start building some. He gets mom or dad to add him as an “authorized user” on one of their credit cards. Technically he becomes able to use the account, but is not responsible for payment (they don’t even have to give him the card). But the years of good credit history from mom & dad instantly pop up on his credit report and jacks his score up. Then he can go out and start building credit MUCH easier than starting from scratch.
The same can be done for someone with a low credit score. Find a friend or relative with great credit to add you to their account as the authorized user. As soon as the new card comes in, destroy it. The authorized user will never be able to use the account but he benefits from the increase in score.
Unfortunately, some websites found a way to cash in on this little loophole and exploit the hell out of it. It turns out they were finding people with good credit and adding them to a list. People with bad credit go to the site. The ones with good credit add the bad ones as authorized users. The bad credit people pay thousands of dollars for this service. The ones with good credit get a percentage. It has been said that one person can have as many as 99 authorized users on one card. Can you see where this is going?? Learn more here, here, and here!
Well to make a long story short, FICO realized this scam and is revamping its scoring models in September of this year. No longer will authorized users have the benefit of the other person’s superior credit. However, critics are saying this is unfair for families who use this legitimately. Think of the millions of spouses out there who hold American Express cards. (You may not know that there are NO co-borrowers or joint accounts for American Express cards, only one primary and then authorized users.) They are estimating that this will affect more than 30 million Americans!!!
Anyway, if you personally have such accounts, you may want to review your credit report NOW! When these go away, it could severely drop your own credit score when you’ve done nothing different. You may even want to apply and get some new credit in your own name now if you think you may be affected in a negative way.
Oh yeh, a good place to check out your credit for free is www.annualcreditreport.com. They will not give you a free SCORE, but you can see whats on your report including any authorized user accounts you may have. Of course you can buy a score if you want, but I don’t recommend it.