Piggy Backing Credit

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 cardholder adds another person as an authorized user on their credit card account. Then, the entire history of that credit card account appears on the authorized user’s credit report and included in their credit score.

How ‘piggybacking’ works

Credit card issuers report both positive and negative payment information about an account to the three major credit reporting agenies: TransUnion, Equifax and Experian. With some exceptions, the account’s entire payment history appears on the credit reports of both the account holder and any authorized users on the account with notations indicating whether they are authorized users. Thus, an authorized user’s credit score could be hurt if the primary account holder begins to miss payments.

The good news is that the major card issuers allow authorized users to call or write to request that their names be taken off the accounts. In most cases, the change takes effect immediately on the credit card account, but may take longer to be removed from the piggybacker’s credit report.

Piggybacking Abuse

Piggybacking became a way for people with bad credit to fake higher credit scores. There are companies who charge a fee to add you as an authorized user to a stranger’s positive credit card account. As a result, you’d see a boost in your credit score. Then, you could use the higher score to qualify for loans, credit cards, and interest rates you wouldn’t have been able to get otherwise. You never get access to a physical credit card or the account information, just the benefit of the history showing up on your credit report.

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 their eponymous score to allow lenders to better predict fraudulent authorized user accounts. The company originally planned to remove authorized user accounts, but fortunately for legitimate authorized users, chose the more consumer friendly route.

Is Piggybacking Illegal?

There’s disagreement on 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. By definition, credit card piggybacking could be considered bank fraud, but, to date, there has been no official ruling on the practice.