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Credit Piggybacking

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If your credit is less than awesome, piggybacking off of someone else’s good credit can help you raise your credit score and get your finances moving in a more positive direction. However, piggyback credit is not without its risks. It’s important to understand the benefits and drawbacks of this method before trying it for yourself.

What Is Credit Piggybacking?

Credit piggybacking means being added on to someone else’s credit accounts—usually credit cards—as a way to boost your own credit score. The other person is essentially carrying you on their credit piggyback-style, which is how this term got its name.

Piggyback credit can be an effective tool to help someone who has no credit or who is trying to rebuild credit to get some positive credit history.

Two Types of Credit Piggybacking

There are two main ways to do piggyback credit, and they both have pros and cons. Check out this overview to determine which option might be the best for you.

Traditional

Traditional piggyback credit involves someone—usually a friend or family member—adding you to their account as an authorized user. The payment history and length of credit can show up on your credit report, boosting your score.

You do have to ensure that the account you’re being added to reports to both your credit history and the account holder’s history, though, because some organizations don’t report on authorized users.

Pros and Cons

The main pro of the traditional route is that you’re working with someone you trust and have a long relationship history with, and there’s no fee or complicated terms involved. The downside, however, is that if the agreement doesn’t work out, it could strain your relationship and cause a falling out.

And, if the person you’re piggybacking off of starts making poor financial choices, your credit could suffer even more as a result.

For-Profit

In a for-profit piggyback arrangement, the basic concept is the same. But instead of working with someone you know, you pay a fee to a company who matches you with someone who has good credit.

Pros and Cons

The obvious downside to a for-profit arrangement is that it costs money. You’re also hitching your financial standing to a complete stranger, which can be unnerving. On the other hand, the upside is that you don’t have to worry about souring a personal relationship if things don’t work out.

Legalities of For-Profit Piggybacking

Credit piggybacking can feel a bit like gaming the system, and the credit scoring companies agree. For example, FICO has made it more difficult to get a positive credit boost from this type of piggybacking. However, for-profit arrangements are still legally permissible and may be a good option if you don’t have friends or family members who are able or willing to help.

Who Can Benefit From Credit Piggybacking?

Anyone with a credit score that leans toward the lower end of the scoring range may benefit from credit piggybacking—that means people with poor or only barely fair credit. People with limited credit histories or no credit, such as young adults, might also benefit from piggybacking.

Does Credit Piggybacking Work?

Yes, in general, credit piggybacking works as long as the accounts are reported to the credit bureaus. There have been some discussions that credit scoring models will start to change the way they handle data to not include piggyback accounts, but as long as you are an authorized user and the account shows up on your credit report, you can reap the benefits.

Best Practices for Credit Piggybacking

Piggyback credit can be a relatively easy way to give your credit score a boost, but there is a right and there is a wrong way to go about it. Check out the best practices we suggest here.

Work With a Family Member or Friend You Can Trust

Piggyback credit is a two-way street when it comes to trust. The person who is adding you as an authorized user is trusting you to be responsible with their accounts and not rack up debt. You’re trusting that they will continue their positive payment history.

For this reason, it’s best to consider only close, trusted friends or family members who are familiar with your financial situation and willing to help.

Keep in mind that getting finances involved can make the relationship awkward. Consider having a plan for what you both will do if the situation doesn’t work out as expected.

Make Sure the Credit Card Is Added to Your Credit Report

You can only get the benefits of credit piggybacking if the account shows up on your credit report. It may take a billing cycle or two to show up, and sometimes, the account may only be reported to one or two of the credit bureaus. If the account doesn’t make an appearance, give the lender a call to find out if they are reporting to the credit bureaus.

Check Your Credit Score and Report Regularly

If you’re not actually using the account, it may be tempting to just have yourself added and forget it. But out of sight, out of mind is a bad idea when it comes to your credit. Ensure that the accounts are reported—and reported correctly—by regularly checking your credit report.

You can typically get your credit report for free once a year from each of the three credit bureaus, and CreditRepair.com also offers services and tools to help you keep tabs on your credit. Through April 2021, you can get your free credit report weekly due to measures enacted to help people manage finances during COVID-19.

Remove Yourself From the Account If Necessary

There may be times that you need to remove yourself from a piggyback account. Common situations include the primary credit holder running up the balance on the card or missing payments. Both of these are significant negatives when it comes to calculating credit scores, and being an authorized user on a problematic account can actually lower your score.

Other Ways to Build Credit

Whether you choose to try piggyback credit or not, there are plenty of other ways to build a positive credit history. Always make all payments on time, as this is one of the key determining factors in your credit score.

If you think you might not be able to pay your bills, reach out to the creditor as soon as possible to see if there are any assistance programs that can help you keep your account in good standing while you get things straightened out.

Other options, such as applying for a secured credit card, taking out a loan or opening a credit card to improve your credit mix and paying down debt can all help build credit and raise your credit score. Keep in mind that building credit is a marathon, not a sprint.

It’s normal to want to boost your score as quickly as possible, but keeping accounts in good standing and building a solid, long-term payment history is a tried and true strategy.

Posted in Credit 101
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