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Piggybacking

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mark12
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Subject: Piggybacking
 
 Posted on Tue Sep 30, 2008 11:25 am  
Recently I have come across "Piggybacking". Can anybody in this forum tell me what actually Piggybacking is and what is its relation with our credit report.
 
anthony

anthony

Joined: 31 Jul 2006
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Posts: 493



12319 Magic Points
 
 Posted on Tue Sep 30, 2008 1:32 pm  
Piggybacking is a process by which a person with bad credit score or with no credit score can build up a good credit history. Here if a person with no credit score becomes the authorized user of a credit account of a person with good credit score, he automatically builds up a good credit history. For example, children have sometimes been made the authorized user of their parent's credit account. Now if the parent maintains a good credit history, this would also reflect in the credit report of the son/daughter who is the authorized user. Thus, even with no line of credit, the son builds up a good credit score.
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Anthony Marx

A positive attitude is not achieved by turning a blind eye to the negative, but rather by responding to every situation in the most positive way possible.
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Mary

Mary

Joined: 06 Jul 2006
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Posts: 324



8704 Magic Points
 
 Posted on Wed Oct 01, 2008 10:15 am  
Yes, Anthony is correct. But, there are also other risks associated with it and that is the main reason while in the new FICO 08 scoring algorithm, this piggybacking has been removed. It sometimes happen that people with bad credit score is made the authorized user of the credit card of a person with good credit score in return of a fee. However, the person with a bad credit is only officially made the authorized user but is not given a credit card. This name in the authorized user status increases his credit score. The main problem with piggybacking is for the creditors to determine the creditworthiness of the borrowers because the borrowers' credit score does not reflect their true creditworthiness.
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