What Is Piggybacking Credit & How Does it Work?

By Austin Kilham · May 24, 2022 · 10 minute read

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What Is Piggybacking Credit & How Does it Work?

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 boosting 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 we get into how piggybacking works, it’s worth considering why your credit score is important. Your credit score is a three-digit number that provides a visual 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, and 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 give yours a boost, 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. As length of credit history has an effect on your credit score, this can prove helpful in boosting 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 actually 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. For more on building healthy credit card habits, check out these credit card rules.

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 first appeared in 2007, and since then they 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. To discourage this type of piggybacking, FICO even tweaked its scoring formulas to make it less effective.

Engaging a tradeline service can also be pricey. Depending on what type of credit you’re looking for, it may cost you as much as $4,000.

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 receive a boost in the short-term, when you’re dropped from the account, your credit score may fall as well.

Recommended: What is a Charge Card

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. Here are some further risks of piggybacking credit to consider if you’re thinking about doing it:

•   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’re trying to 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, by 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 keep your credit score up is to not take on more debt than you can afford and to make payments on time. If you don’t give yourself experience with doing that, you may not learn healthy financial behaviors.

•   It could get you in over your head down the road. Boosting your credit to a point that doesn’t reflect your actual credit activities can land you in a bit of 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 often 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 ready your credit report can also clue you into areas of your credit that need your attention and may be dragging down your score.

Recommended: Tips for Using a Credit Card Responsibly

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. When you’re ready to strike out on your own, consider a credit card from SoFi, which offers up to 2% unlimited cash back rewards and no annual fee. If you’re interested, you can learn how to apply for a credit card with SoFi today.1

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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 raise your credit score?

According to one recent study, individuals with poor credit could see a jump of nearly 12% after three months when becoming an authorized user. Those with better credit saw a smaller bump. Individuals with excellent credit only saw a 1% change in their credit score after three months.

Does piggybacking credit still work in 2022?

Piggybacking still works in 2022, though credit reporting bureaus credit scoring companies may frown on it. FICO, for one, has adjusted its scoring to limit the effect of becoming an authorized user.

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