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When you piggyback on someone else’s credit card, you become an authorized user on their account. Usually, this is in service of establishing credit for the first time or building your credit score.

While piggybacking credit can serve as an important tool as you establish firm financial footing, there are also situations in which it can be risky. Because of this, it’s important to understand how piggyback credit works before using this strategy.

What Is Credit Card Piggybacking?

When piggybacking credit, you become an authorized user, or a secondary account holder. As a secondary cardholder, you may receive your own card and account number. You’ll be allowed to make purchases on the account, but you aren’t necessarily responsible for payment. This differs from joint accounts or for loans that are cosigned, where all parties are responsible for payment.

The primary account holder will be able to view all of the purchases and will ultimately be responsible for making all payments. You’ll likely enter into some sort of agreement with the primary account holder to pay them back for any purchases that you make. You may also agree not to use the account at all.

Piggybacking can refer to other types of debt as well, such as a piggyback mortgage loan. Here, the term is used slightly differently and usually refers to a second mortgage, a home equity loan, or a home equity line of credit (HELOC).

How Does Credit Card Piggybacking Work?

Before explaining how piggybacking works, it’s worth considering why your credit score is important. Your credit score is a three-digit number, typically between 300 and 850, that provides an indicator of your creditworthiness. Credit card companies, banks, and other lenders will look at your score to determine how risky it is to extend credit to you.

Borrowers with the highest scores are seen as the lowest risk. In other words, they are the most likely to pay their bills on time and the least likely to default on their debt. Lenders are often willing to extend the most favorable credit card terms and conditions, including interest rates, to these borrowers.

Individuals with lower scores are seen as presenting higher potential risk. Their low scores indicate that they’ve likely had trouble paying their bills on time in the past. As a result, lenders may be less willing to extend credit. If they do, it may come with higher interest rates to compensate the lender for the increased risk they’re taking on.

If you don’t have a credit history or are looking to build yours, credit card piggybacking can help. That’s because when you become an authorized user on someone else’s card, their credit history for that account has an impact on yours.

When you become an authorized user, that account pops up in your credit report. If the primary account holder has a long history of paying their bills on time or they keep their balance low, this might have a positive effect on your credit. If the account has been open for a long time, say 15 years, it will read on your credit report as a 15-year account. Since length of credit history has an effect on your credit score, this can prove helpful in building your score.

Beware, however, that the impact on your credit score doesn’t always move in the positive direction. If the primary account holder misses payments, for example, the account could have a negative effect on your credit.

Recommended: When Are Credit Card Payments Due?

Does Piggybacking Credit Actually Work?

Piggybacking on a credit card does usually work, but not all of the time. For one, not all credit card companies will report a secondary account holder to the credit reporting bureaus, which include Equifax^®, Experian^®, and TransUnion^®.

What’s more, when you become an authorized user, you’re not necessarily learning to use credit cards responsibly — especially if you’re not using the account or making purchases and having to pay them off on time.

Is Piggybacking Illegal?

Piggybacking is not illegal. In fact, under the Equal Credit Opportunity Act, Congress determined that authorized users cannot be denied on existing credit accounts. This rule applies even if the person being authorized is a stranger.

That said, there are situations in which becoming an authorized user is a deceptive practice and may entice you into some fraudulent situations. (More on this below.)

What Is Person-to-Person Piggybacking?

Person-to-person piggybacking involves becoming an authorized user on the account of a significant other, family member, or friend. For example, young adults often become an authorized user on their parent’s credit card as they seek to build credit for themselves.

Eventually, that young adult will have built enough credit to get a credit card of their own and will be financially stable enough to be able to pay it off on time. At this point, they can decide to drop from their parents’ account.

What Is For-Profit Piggybacking?

Here’s where things get tricky. If you don’t have a friend or family member who’s willing to make you an authorized user on their account, you can seek out the help of a tradeline service. A tradeline is another word for a revolving credit account or installment loan on your credit report.

The tradeline service can match you with a stranger who has good credit, and, for a fee, they’ll add you to their account. The cardholder receives a portion of that money, and you won’t receive a physical card or access to the account.

Tradeline services haven’t been without controversy. For one thing, the practice of purchasing a tradeline can be seen as a method of deceiving lenders into thinking you have better credit than you do. If perceived as fraud, this could have some legal ramifications.

Engaging a tradeline service can also be pricey. Depending on what type of credit you’re looking for, it may cost you anywhere from a few hundred to a few thousand dollars.

It’s also important to understand that you’re only authorized on the cardholder’s account for a short period of time. While your credit may be built in the short-term, when you’re dropped from the account, your credit score may fall as well.

Risks of Credit Card Piggybacking

In addition to the considerations above, there are other risks to be aware of when piggybacking, especially when doing so through a third party.

•   You have to give out your private information. This includes your name, address, and Social Security number. The service and cardholder may not have your best interests at heart, and providing them with your data may put you at risk for fraud and identity theft.

•   It’s not looked on favorably by lenders. Lenders look to your credit score to learn how well you’re able to manage your debts. If they learn that you’ve used a tradeline service, they may lose trust in you and be less likely to extend credit to you.

•   There’s the potential for fraud. Be on the lookout for shady tradeline companies with fraudulent practices. Beware any company that tells you that you can hide bad credit or a bankruptcy using a credit privacy number. The number they provide might actually be someone else’s Social Security number, which would put you at the heart of an identity theft scam.

•   It could hurt your credit. You might also be duped into buying an account that’s gone into default, which could hurt your credit.

•   There’s the potential for address merging, which is fraudulent. Sketchy companies may also try to use a process called address merging. This involves claiming that the authorized user lives at the same address as the account holder. This is fraudulent and indicates that you are not working with a reliable company.

•   You may not give yourself the chance to build healthy financial habits. The best way to build your credit score is to not take on more debt than you can afford and to make payments on time. If you don’t have experience with doing that, you may not learn healthy financial behaviors.

•   It could get you in over your head down the road. Building your credit to a point that doesn’t reflect your actual credit activities can land you in hot water if you qualify for a loan only to realize later you can’t actually afford it. You don’t want to end up in a place where you’re wondering if you can pay a credit card with a credit card.

Is Credit Card Piggybacking Right for You?

Credit card piggybacking may be right for you if you’re building credit for the first time and need a way to get your foot in the door.

If you do decide to try piggybacking credit, it may be best to piggyback on the credit of someone close to you. Only turn to tradeline services if there are no other options available, and make sure to carefully vet any options and consider the costs involved.

Alternatives to Credit Card Piggybacking

Piggybacking isn’t the only way to build your credit.

There are many different types of credit cards. Secured cards, for instance, require you to make a security deposit to receive a line of credit, which makes them easier for people with no credit history to qualify for. The credit limit on the card is typically equal to the security deposit amount.

You can also look for tools that allow you to get credit for paying off bills and utilities on time. For example, Experian, one of the major credit reporting bureaus, offers Experian Boost as a free service.

Recommended: Does Applying For a Credit Card Hurt Your Credit Score?

Tips for Managing Your Credit History

As you build your credit history, there are important steps that you can take to help ensure your credit score is as high as possible:

•   First and foremost, always pay all or your bills on time.

•   Next, you’ll want to have a diverse mix of credit, such as credit cards, student loans, auto loans, or a mortgage.

•   Keep your credit utilization below 30%. For revolving credit, credit utilization measures how much of your credit limit you are currently using. You can calculate it by dividing your credit card balance by your loan limit.

•   Work to keep hard inquiries at a minimum. When you apply for credit, you trigger what is known as a “hard inquiry.” These can temporarily lower your credit score, especially if there are many in a short period of time.

You’ll also want to be diligent about monitoring your credit report. You can request a free credit report from each of the three credit reporting bureaus once a year. That means, you could be checking your credit report every four months. Look for mistakes on the report and alert the reporting bureaus immediately if you spot anything that’s amiss.

Learning to read your credit report can also clue you into areas of your credit that need your attention and may be dragging down your score.

The Takeaway

Piggybacking credit — becoming an authorized user on another person’s credit account — can be an important tool for building credit. Yet, you only get a benefit with credit card piggybacking if the person’s account is in good standing. If they miss a payment, it could have a negative impact. And if you use a third-party tradeline service, you could be putting your personal information at risk.

Weigh these factors carefully before choosing to build credit using this strategy, and be sure to consider other options.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

Is piggybacking credit illegal?

Piggybacking credit is not illegal. In fact, Congress has said, under the Equal Credit Opportunity Act, that no authorized users can be denied on existing credit accounts, even if that credit account belongs to a stranger.

How much can piggybacking positively impact your credit score?

According to one recent study, piggybacking can build a credit score by, on average, 22 points.

Does piggybacking credit still work in 2024?

Piggybacking can still work in 2024, though credit reporting bureaus and credit scoring companies may frown on it.

Photo credit: iStock/Morsa Images

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOCC-Q224-1884554-V1

One way traders seek to profit from short-term movements in security prices is by using technical analysis.

While some stock analysis tools examine company fundamentals, technical stock indicators identify patterns in price and volume data to give investors and traders insights about how a stock might move in the future.

For that reason, although technical indicators can assist with trend identification, it’s best to combine different indicators when conducting stock analysis.

How Do Stock Technical Indicators Work?

Technical analysis uses various sets of data and indicators, such as price and volume, to identify patterns and trends. This type of stock market analysis is different from fundamental analysis, which looks at company financials, industry trends, and macroeconomics.

Rather, technical analysis solely analyzes a stock’s performance. Stock technical indicators are often rendered as a pattern that can overlay a stock’s price chart to predict the market trend, and whether the stock would be considered “overbought” or “oversold.”

Two Main Types of Technical Indicators

Stock technical indicators generally come in two flavors: overlay indicators and oscillators.

Overlay Indicators

An overlay indicator typically overlays one trend onto another on a stock chart, often using different colors to distinguish between the lines.

Oscillator Indicators

An oscillator typically uses metrics such as a stock’s price or trading volume to determine momentum, or rate of change, over time. It uses this info to generate a signal, or trend line, whose fluctuations between two values in a range can indicate if a stock may be overbought or oversold.

If the trend line moves above the higher value of the range, it can indicate a stock is overbought, while dipping below the lower value can indicate it’s oversold. The movements of the trend line thus can help traders determine support and resistance in certain price trends, so they can decide whether to sell or buy (support being the price at which a downturn generally bounces back up, and resistance being the point at which rising prices generally start to fall).

Oscillator indicators can be leading or lagging:

•   A leading indicator tracks current market movements to anticipate where the trend is headed next.

•   A lagging indicator is based on recent history and seeks patterns that will indicate potential price movements.

The moving average is a common oscillator; it’s considered a lagging indicator as it measures specific intervals in the past.

Naturally, every stock indicator has its pros and cons. Various trading indicators can be used by investors to analyze supply and demand forces on stock price, to help shed light on market psychology, or to manage risk.

But while stock indicators and trading tools can help with buy and sell points, false signals can also occur.

Reasons to Use Stock Market Indicators

Knowing some of the most popular trading tools might benefit your investing strategy by providing you with easier-to-spot buy and sell signals. You don’t have to know every single technical indicator, and there are many ways to analyze stocks, but using multiple stock indicators may help you improve trading results.

You can also use these stock indicators to help you manage risk when you are actively trading.

Price trend indicators are some of the most important technical trading tools since identifying a security price’s trend is often a first step to forming a trading strategy. Long positions are often initiated during uptrends, while short sale opportunities can occur when prices are in a downtrend.

Volume trend indicators are also helpful to gauge the power or conviction of an asset’s price move. Some believe that the higher the stock volume on a bullish breakout or bearish breakdown, the more confident the move is. Higher volume could signal a lengthier trend continuation.

💡 Quick Tip: All investments come with some degree of risk — and some are riskier than others. Before investing online, decide on your investment goals and how much risk you want to take.

7 Stock Indicators for Technical Analysis

It’s important to remember that these trading tools were developed based on the belief that mathematically derived patterns may be valuable as predictors of stock movements. Past performance, however, is not a guarantee of future results. So while it can be useful to employ stock technical indicators, they are best used in combination before deciding on a potential trade.

Also, many of these trading tools are lagging indicators, which can lead to an inaccurate reflection of current and future market conditions.

Following are seven of the most common technical stock indicators, along with their advantages and disadvantages.

1. Moving Averages (MA)

A moving average (MA) is the average value of a security over a specific time. The MA can be:

•   Simple Moving Average (SMA)

•   Exponential Moving Average (EMA)

•   Weighted Moving Average (WMA).

A moving average smooths stock price volatility, and is taken as an indicator of the direction a price may be headed. If the price is above the moving average, it’s considered an uptrend versus when the price moves below the MA, which can signal a downtrend.

Moving averages are typically used in combination with each other, or other stock indicators, to identify trends.

Pros

•   Using moving averages can filter out the noise that comes from price fluctuations and focus on the overall trend.

•   Moving average crossovers are commonly used to pinpoint trend changes.

•   You can customize moving average periods: common time frames include 20-day, 30-day, 50-day, 100-day, 200-day.

Cons

•   A simple moving average may not help some traders as much as an exponential moving average (EMA), which puts more weight on recent price changes.

•   Market turbulence can make the MA less informative.

•   Moving averages can be simple, exponential, or weighted, which might be confusing to new traders.

2. Moving Average Convergence Divergence (MACD)

The Moving Average Convergence Divergence (MACD) helps investors gauge whether a security’s movement is bullish or bearish, and helps gauge the momentum of the trend. The MACD uses two different exponential moving averages (EMAs) to do so.

A 26-period EMA is subtracted from a short-term 12-period EMA to generate the MACD line. Then a signal line, based on a nine-day EMA, is plotted on top of the MACD to help reveal buy and sell entry points.

If the MACD line crosses above the signal line, that can signal a buy opportunity. If it crosses below the signal line, that could signal a price decline and an opportunity to sell or take a short position.

Pros

•   The MACD, used in combination with the relative strength index (below) can help identify overbought or oversold conditions.

•   It can be used to indicate a trend and also momentum.

•   Can help spot reversals.

Cons

•   The MACD might provide false reversal signals.

•   It responds mainly to the speed of price movements; less accurate in gauging the direction of a trend.

3. Relative Strength Index (RSI)

The relative strength index or RSI is an oscillator tool that looks at price fluctuations in a given period and calculates average price losses and gains. It ranges from 0 to 100. Generally, above 70 is considered overbought and under 30 is thought to be oversold.

Traders often use the RSI in conjunction with the MACD to confirm a price trend. The RSI can sometimes identify a divergence, when the indicator moves in opposition to the price; this can show the price trend is weakening.

Pros

•   An RSI can help investors spot buy or sell signals.

•   It may also help detect bull market or bear market trends.

•   It can be combined with moving average indicators to spot breakout trends or reversals.

Cons

•   The RSI can move without exhibiting a clear trend.

•   The RSI can remain at an overbought or oversold level for a long time, making this tool less useful.

•   It does not give clues as to volume trends.

Recommended: 5 Bullish Indicators for a Stock

4. Stochastic Oscillator

Traders will often use the stochastic oscillator, which is a momentum indicator, to determine whether a given security is overbought or oversold. The stochastic oscillator allows traders to compare a specific closing price of a security to a range of its prices over a certain time frame.

By using a stochastic chart, traders can gauge the momentum of a security’s price with the aim of anticipating trends and reversals. A stochastic oscillator uses a range of 0 to 100 to determine if an asset is overbought (when the measurements are above 80) or oversold (when the measurement is below 20).

Pros

•   Clearer entry/exit signals: The oscillator has a basic design and generates visual signals when it reaches the outer bounds of a price range. This can help a trader determine when it may be time to buy or to sell stocks.

•   Frequent signals: For more active traders who trade on intraday charts such as the 5-, 10-, or 15-minute time frames, the stochastic oscillator generates signals more often as price action oscillates in smaller ranges.

•   Easy to understand: The oscillator’s fluctuating lines are fairly clear for investors who know how to use them.

Cons

•   Possible false signals: Depending on the time settings chosen, traders may misperceive a sharp oscillation as a buy or sell signal, especially if it goes against the trend. This is more common during periods of market volatility.

•   Doesn’t measure the trend or direction: It calculates the strength or weakness of price action in a market, not the overall trend or direction.

💡 Quick Tip: When you’re actively investing in stocks, it’s important to ask what types of fees you might have to pay. For example, brokers may charge a flat fee for trading stocks, or require some commission for every trade. Taking the time to manage investment costs can be beneficial over the long term.

5. On-Balance Volume (OBV)

OBV is a little different from the other indicators mentioned. It primarily uses volume flow to gauge future price action on a security or market. When there’s a new OBV peak, it generally indicates that buyers are strong, sellers are weak, and the price of the security may increase.

Similarly, a new OBV low is taken to mean that sellers are strong and buyers are weak, and the price is trending down.

The numerical value of the OBV isn’t important — it’s the direction that matters. In that respect it can be used as a trend confirmation tool. It can also signal divergences, when the price and the volume move in opposite directions.

Pros

•   Volume-based indicator gauges market sentiment to predict a bullish or bearish outcome.

•   OBV can be used to confirm price action and identify divergences.

Cons

•   It can be hard to find definitive buy and sell price levels.

•   False signals can happen when divergences and confirmations fail.

•   Volume surges can distort the indicator for short-term traders.

Recommended: How to Find Portfolio Beta

6. Accumulation / Distribution Line (ADL)

The accumulation/distribution line (ADL) looks at the trading range for a certain stock, and uses price and volume data to gauge whether shares are being accumulated or distributed. Like OBV it also looks for divergences, so that if a price trend isn’t supported by volume flow it could indicate the trend is about to reverse.

Although this sounds similar to OBV, they are calculated differently, and the ADL gives more attention to price and volume data within a specified range.

Pros

•   Traders can use the ADL to spot divergences in price compared with volume that can confirm price trends or signal reversals.

•   The ADL can be used as an indicator of the flow of cash in the market.

Cons

•   It doesn’t capture trading gaps or factor in their impact.

•   Smaller changes in volume are hard to detect.

7. Standard Deviation

Standard deviation measures the extent to which a data point deviates from an expected value, i.e. the mean return. When used as a technical indicator, standard deviation is a common stock volatility measure; it refers to how far a stock’s performance varies from its average.

Investors often measure an investment’s volatility by the standard deviation of returns compared with a broader market index or past returns.

Pros

•   Standard deviation mathematically captures the volatility of a stock’s movements, i.e. how far the price moves from the mean.

•   It provides technicians with an estimate for expected price movements.

•   It can be used to measure expected risk and return.

Cons

•   It does not provide precise buy and sell signals.

•   It must be used in conjunction with other indicators.

The Takeaway

Technical analysis tools use past price and volume data to help traders identify price trends and make buy and sell decisions. It’s important to know that technical analysis does not use fundamentals to assess the underlying companies, their industries, or any macroeconomic trends that might drive their success or failure. Rather, technical analysis solely analyzes the movement and volume inherent in a stock’s performance.

Invest in what matters most to you with SoFi Active Invest. In a self-directed account provided by SoFi Securities, you can trade stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, options, and more — all while paying $0 commission on every trade. Other fees may apply. Whether you want to trade after-hours or manage your portfolio using real-time stock insights and analyst ratings, you can invest your way in SoFi's easy-to-use mobile app.

FAQ

What is the most popular technical indicator for stocks?

Traders typically combine technical indicators, so it’s difficult to point to one as being a top choice. That said, many traders use the moving average indicators in combination with others to gauge price trends.

What is the most accurate indicator of the stock market?

There is no single indicator that can anticipate overall stock market performance. In fact, it’s an important factor to keep in mind when using technical indicators: For every successful price prediction or winning trade, there are countless others that don’t pan out. There are no crystal balls.

Which indicator gives buy and sell signals?

Different traders favor different indicators when looking for signals about how to place a trade. That said, the stochastic oscillator is relatively clear-cut in that it can help traders identify buy and sell opportunities based on price closes and trends within a certain range.

Photo credit: iStock/staticnak1983