Credit Card Piggybacking and Its Impact on Credit Scores

Man riding a piggybank
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For years, parents have used credit card piggybacking to help their children get a jump start on their credit. Credit card piggybacking refers to adding someone as an authorized user on your credit card in order to boost their credit.

Credit card piggybacking came under intense scrutiny around the time of the 2008 financial crisis and mortgage meltdown. Shady credit repair companies and dishonest consumers used the process of piggybacking credit to artificially boost bad credit scores to qualify for mortgages that homeowners really couldn't afford. For a while, it seemed that the benefits of piggybacking credit were going to disappear, even for people who used the practice legitimately.

How Does Credit Card Piggybacking Work?

Credit card piggybacking is much like the childhood game of being carried around on someone else's back, but instead of a back, you're carried on someone else's credit card account.

A credit card holder adds another person as an authorized user on their credit card account. An authorized user is someone added to a credit card account who can use the card to make purchases. However, the authorized user is not the primary account holder on the card.

Once an authorized user is added to the account, the entire history of that credit card account appears on the authorized user's credit report and included in their credit score. None of the primary cardholder's other cards or loans will appear on the authorized user's credit history, just the one card.

If you're added as an authorized user on a credit card and the primary cardholder has a positive payment history, you might see a boost in your credit score. On the other hand, late payments and high credit card balances for the primary cardholder could hurt the authorized user's credit score. Conversely, the primary cardholder who has added the authorized user could see a hit to their credit score if the authorized user has a poor credit history.

You must check with the credit card company and the credit agency to determine whether their credit scoring models include authorized users. Not all credit card companies report authorized user accounts to credit bureaus, partly because of the cost and partly because of the way the practice has been abused.

Piggybacking Abuse

Piggybacking became a way for people with bad credit to fake higher credit scores without having actually done the work to build credit on their own. As a result, they'd see a boost in their credit score. Then, they would use the higher score to qualify for loans, credit cards, and interest rates they wouldn't have been able to get otherwise. When piggybacking, you don't get access to a physical credit card or the account information, just the benefit of the cardholder's history showing up on your credit report.

There even are companies who charge a fee to add you as an authorized user to a stranger's positive credit card account.

When the mortgage meltdown began, lenders realized they'd been defrauded and criticized the way authorized user accounts could be manipulated to artificially inflate credit scores. In response, FICO tweaked its formula to help lenders better predict fraudulent authorized user accounts. The company originally planned to remove authorized user accounts from the calculation completely, but fortunately for legitimate authorized users, FICO chose the more consumer-friendly route.

Is Piggybacking Illegal?

There's disagreement as to whether credit card piggybacking is illegal or just deceptive. U.S. law says that someone who commits bank fraud "knowingly executes, or attempts to execute, a scheme or artifice to defraud a financial institution; or to obtain any of the moneys, funds, credits, assets, securities, or other property owned by, or under the custody or control of, a financial institution, by means of false or fraudulent pretenses, representations, or promises." The crime is punishable by a maximum $1 million fine or 30 years in prison or both.

Based on the definition, credit card piggybacking could be considered bank fraud, but, to date, there has been no official ruling on the practice.

Does Piggybacking Still Work?

It's not as easy to artificially boost your credit score because the credit industry has closed in on the loophole. Some credit card issuers do not report authorized user accounts to the credit bureaus, or they only report the account when the authorized user actually has a credit card on the account. Credit scoring calculations have become more sophisticated, detecting when an authorized user account is legitimate and when you've been added to a stranger's account for the purpose of boosting your credit score.