I was reading somewhere recently about services that would, for a fee, temporarily “piggyback” you onto someone else’s credit (FICO?) score in order to get your score up to where you could qualify for a better rate on a loan. Or a loan period if your credit was that bad.
Anybody have any information on these service(s)? My credit is fine and I have NO plans to buy anything like a house, car, truck or anything anytime soon. I built this house and have no desire to do it again; they’ll bury me here in the back yard.
I’m just curious as to how all that works and would like to learn more about it.
The idea behind this scheme is that, for a fee, the company would pay somebody with good credit to add you as an “authorized user” on one or more of their credit cards. Some banks, when adding an authorized user to an account, report the account’s payment history to both persons’ credit reports. You would never actually receive a new credit card, but your credit report would benefit from this other person’s good history.
The credit card companies got wise to this a couple years ago and started closing the loophole. They now generally only allow shared histories between family members (which is the most common use of authorized users anyway.)
Federal legislation that would make selling authorized usership illegal has been debated a couple times, but it’s largely moot now since the scheme doesn’t really work anymore.
(And even when it did work, it wasn’t hugely useful – all the bad stuff remains on your report, too.)
Doesn’t seem fair that you can’t add whatever user you want if both of you agree to it. And what business is it of the CC companies anyway if they can’t get stuck with a huge uncollectable bill? I wouldn’t think that someone with credit that’s REALLY bad would be helped all that much anyway. Surely this practice would only bump up someone’s score a few percentage points not change it from say, 650 to 790!
The CC companies have a substantial interest in ensuring that credit scores remain an accurate indicator of a person’s likelihood to default. If a large number of people can game the system and make themselves look more credit-worthy than they are, we all suffer.
Well, I think you can still add whoever you want as an Authorized User, so they can use the card but it won’t necessarily be taken into account as part of their credit history. Which is fine, because being an AU (as opposed to a named account holder) doesn’t mean that you were ever responsible for paying that bill anyway.
And actually it can help your score quite a bit depending on what caused you to have a low score. If you actually have a bad record, it won’t help much, but if you have a short history (just joined the workforce) or just got out of bankruptcy (and all the baddies have fallen off your report) a single card with a long and good payment history will boost your score significantly.
When my wife was just added as an AU on my Visa and we were looking at buying a car, her score was higher than mine, even though she only held one bank card and a couple of store cards with low limits ($3-4k total) and I had Visa/MC/Discover with high limits ($30k total) and low utilization. But the difference in scores wasn’t significant enough to make a difference in the loan rate, so I wasn’t too bothered by it.
Also note that the credit scores don’t take income into account, though maintaining a good payment history implies a certain level of reliable income.
Very soon, FICO scores are going to stop counting “authorized users”, so the loophole has been pretty effectively closed.
In a related question: Isn’t it incredibly risky to do this with some random person? What’s to stop them from figuring out the card number and just going wild spending up to the limit? Would it even be illegal to do so? After all, you authorized them to use your account.