Credit score piggybacking
Credit Score piggybacking refers to the practice of artificially raising a credit score by becoming an authorized user on an account with another person. For the practice to help the score of the one who piggybacks the account on which the consumer is added must be an older account with an excellent payment history and a low debt to available credit ratio. This will accomplish 3 things for the piggybacker:
- It increases his “average age of accounts” which is 15 percent of his FICO score.
- It makes his debt to available credit ratio improve which is 30 percent of his FICO score
- It gives him an excellent payment history on that account which is 35 percent of his FICO score.
Credit Score Piggybacking sounds too good to be true
There are some things you need to know before you go ahead and try credit score piggybacking. The credit scoring industry has developed an algorithm which they say helps them screen out phony piggybacking with unrelated people. There was a court case that ruled against them on this to some degree because that distinction smacked of discrimination. Certainly it is totally legitimate to add your spouse to your account. The spouse with the stronger credit score has always been able to help the spouse with the weaker score that way.
Here is where the discrimination comes in. Relationships take many forms in modern society. Devoted same sex couples or couples who choose to live separate and apart can’t be discriminated against. Best friends have a right to help each other in this perfectly legitimate way. Who is to decide where it begins or ends?
FICO’s Formula on Credit Score Piggybacking remains a “secret sauce.”
Like any other business FICO has its trade secrets. Most of what goes into credit scoring has been figured out by their own public announcements, reverse engineering of results under various scenarios or interviews with former FICO employees. There still remains in FICO’s mind a need to keep some secrets in order to prevent people from gaming the credit scoring system. It’s my belief based on numerous interviews and examples of real life situations that FICO is not very effective in controlling credit score piggybacking. They tried but the court got in the way fearing wide spread discrimination. Times have changed. Domestic partners can get their own credit cards without their own income now. Many experts think FICO takes into account whether the people use the same address but I’ve seen no proof of that.
Just because you may get away with it doesn’t mean you should do it
Many pitfalls potentially await those who try to use this arrangement to help a family member or friend. The one offering the helping hand must decide whether or not to let the other person actually have the credit card. There may be good reasons why they are in credit trouble. The helper frequently finds their own score taking a hit when unauthorized use skyrockets the balance hurting their debt to available credit ratio and probably leaving them stuck with the bill. Don’t let the one who is credit score piggybacking have the actual card if you decide to do this favor for a friend.
It can be hard to say no to someone close but…
One thing that makes it hard to say no is that there is no down side to the one doing the favor if he never actually lets the person have real access to his account. It still comes uncomfortably close to fraud when you think about it. That person is going to get credit they don’t really deserve.