Low credit scores can have far-reaching consequences. If you are shopping around for a mortgage or other form of loan, a low credit score can lead to a higher interest rate or worse, denial. Some consumers have a loophole or think they think so.
It is called piggybacking. If an authorized user is on someone else’s credit account, the account history will then appear on your credit report. If the account to which you are an authorized user has a positive credit history, you can see a boost in your credit score. If you do not have a good credit score to achieve, adding some of these accounts can be enough to increase your score to get approved for a loan or offered a better interest rate.
Some pay a fee to “borrow” someone else’s better credit information on a credit report.
How Buying Better Credit Works
You pay the company a fee ranging from a few hundred to a few thousand dollars, depending on the number of accounts you want to be added. You your name and social security number. The company searches people with good credit accounts to add you as an authorized user on one or more of their accounts.
Once the credit card company has reported to the credit bureaus, you are taken from the accounts. The account details are displayed in your credit score and remain on your credit report for seven years. The positive payment history can compensate other negative information on your credit report and increase your credit score.
Legal, but doubtful
Even though it’s cool for now, it’s unfair. When passing out a good credit from someone else like your own, you are misleading creditors and lenders. Essentially, you tell them that you have paid your bills on time while in reality you are not. If you are approved for a loan using these methods, you have obtained permission under false pretenses.
The credit scoring system is in place for a reason-giving creditors and lenders a system through which they can make sound lending decisions. Although there are some exceptions, the credit scoring system is honest about whether you pay your bills than you are.
When you get approved for a loan or credit card without having to pay the spending habits on time, it is very likely that your default and end up hurting the good credit score you get to obtain hundreds, even thousands of dollars.
Privacy and security
You must ensure your social security number to be added as an authorized user on behalf of the other person. Your social security number lands in the hands of the person you add to his (or her) accounts. The way the process works, you don’t know who this person is or how private they keep your personal information.
When you give your social security number, there is a risk that your identity can be stolen. Don’t think that just because you already have bad credit, that extra damage cannot be done if your identity is stolen.
Piggyback Schemes no longer effective
This credit repair tactic of forging a good credit history is one of the factors that caused the 2008 credit crisis. Many borrowers used their fake credit scores to come for loans that they really couldn’t afford. Because of it, credit scoring algorithms either discount authorized user accounts in full or their opinion, unauthorized user accounts that have been added for credit boosting purposes.
A better approach
Instead of spending thousands of dollars hiring a good credit from someone else, spend that money on improving your credit. Take an inventory of your debts and put together a plan to pay them.
The discipline you acquire by earning a good credit score will benefit you much more in the long run than passing off a good credit from someone else as your own.