Piggybacking, as a way of improving credit score, is when a person who needs credit repair is listed as an authorized user on another person’s credit card. The card you piggyback to repair credit rating should have a better credit history than your own. The card’s transaction history on which you piggyback will be listed on your credit history, thus boosting your credit.
It is important to note that piggybacking is different from having a bank account. Piggybacking comes with no legal obligations to the account or any of the transactions for you. In a joint account, both parties have a legal responsibility for the account.
Types of Piggybacking
There are two types of piggybacking; person to person and for-profit piggybacking.
Person to Person Piggybacking
This is where you make arrangements with an individual to use their credit card. The person on whom you piggyback could be a friend, a spouse, or a parent with excellent credit. The primary cardholder then calls their credit card company and advises them to list you as an authorized user. The next step is for the company to issue you with a card for the account if you need one. Getting a card may not be necessary if you won’t be using the account often personally.
This arrangement allows you to make changes to the card. You will also have online access and the ability to make payments using the card. You can’t do some things on a card on which you have piggybacked; increasing the limit or lowering APR.
You should choose the person on whose card you piggyback carefully. They should be people with both solid credit history and a significant financial foundation. It is unlikely for them to go into hard times because if their credit rating tanks, the piggybacking will end up causing you more damage.
If you can’t get a qualified person close to you to add you to their card, this option is available for you. It is a less preferred option because you pay for the service, you can’t get a card, you can’t charge or make payments on the card or charge it. The other reason why this option is less effective than its person-to-person counterpart is that some credit bureaus frown upon it. Some agencies have even revised their procedures to limit the effect of for-profit piggybacking on credit reports.
This piggybacking is organized by credit repair companies. The link you up with someone with excellent credit for a fee. The person adds you to their card for a share of the cost you paid to the repair company.
Piggybacking is perfectly legal. It was established by the Equal Credit Opportunity Act-1974, which was meant to correct credit discrimination against women. Women often found themselves without credit history even after using their husband’s credit cards. They even helped to pay off the debts accrued through the card, yet they had nothing to show about credit rating. The ECOA-1974 made it necessary for cardholders to include authorized users to correct the injustice.
Angela Kovacs of Van Buren Township, Michigan is the founder and CEO of Credit Repair Gal. A credit restoration firm in Michigan.