Credit card piggybacking is when you become an authorized user on a credit card account owned by someone with better credit than you in order to benefit from the information reported to the major credit bureaus each month. When you’re an authorized user on a credit card, the account is added to your credit report, and certain details about its status are updated monthly, which can help you build or rebuild your credit history over time. You’ll get credit for every on-time payment the primary accountholder makes. And the account’s credit limit will count toward your available credit.
Normally, there’s little risk for someone who piggybacks a credit card as an authorized user. Authorized users are not responsible for paying the bill, so it’s unfair to hold them responsible for paying late (or not at all). As a result, authorized users can dispute accounts with negative info and get them removed from their credit reports. But that is not to say abusing this type of arrangement lacks consequences.
Why Credit Card Piggybacking Abuse Could Be Illegal
Although credit card piggybacking can be used innocently to describe authorized use of a credit card as a credit-improvement strategy, it also refers to a money-making scheme where people sell authorized-user status to strangers in need of credit repair. The practice gained attention during the Great Recession, after it was revealed that companies were using the strategy to help risky borrowers qualify for home loans.
Credit card piggybacking is not illegal in the case of a legitimate authorized user relationship. But it could be considered bank fraud if used to deceive financial institutions and borrow money under false pretenses. It may not be an open-and-shut case, but you don’t want to test the boundaries here. Bank fraud carries a penalty of up to $1 million in fines and 30 years in prison.
Other Credit Card Piggybacking Problems
Credit card piggybacking abuse also is a recipe for other types of trouble, both for the buyer and the seller of the service.
You can make anyone an authorized user on your credit card, as long as you have their name, address, birthday and Social Security number. Many credit card companies don’t even have a minimum age for authorized users. But it’s extremely dangerous to give a stranger your SSN because that could lead to serious identity theft and fraud. Similarly, if you add someone to your account, you need to be very careful to restrict their spending privileges to your liking. That’s important because some credit card companies will not report an authorized user’s account to the credit bureaus unless he or she is issued a card.
At the end of the day, paying for help repairing your credit usually isn’t wise. There’s little you can pay for that you can’t do yourself for free. And that includes credit card piggybacking. If you don’t have a close friend or family member with good or excellent credit who will make you an authorized user on their account, place a deposit on a secured credit card.
Secured cards offer nearly guaranteed approval, and having your own credit card account will help you build credit faster than just being an authorized user would. You just have to pay your bill on time every month and otherwise manage your account responsibly.
For your convenience, we’ll highlight the right way to go about piggybacking credit below.
Here’s how to piggyback credit the right way:
- Find a family member or close friend with good or excellent credit.
- Ask to become an authorized user on a credit card.
- Confirm the credit card is added to your credit report.
- Apply for a secured credit card to build credit faster.
- Pay all of your bills on time every month.
- Check your credit report and score regularly to make sure they improve.
You don’t need bad credit for credit card piggybacking to help. Being an authorized user can help you build out limited credit, get over the hump from fair credit to good credit, or even maintain a great score.