Credit Card Piggybacking: What it is and How it Works
Credit card piggybacking is a credit-building strategy. This is helpful when you have a low or no credit score. By becoming an authorized user, you can “piggyback” on someone else’s credit card. You can access the account holder’s credit line and payment history. Also, it can help you improve your credit score.
Credit card piggybacking can be viable if you need help building credit independently. However, it also comes with risks and drawbacks that you should carefully consider.
This article will explore the basics of credit card piggybacking, how it works, and its benefits and drawbacks. We will also discuss the legal and ethical concerns and the alternatives to credit card piggybacking.
Understanding the Basics of Credit Card Piggybacking
Credit card piggybacking is a credit-building strategy where you are added as an authorized user to someone else’s credit card account. You can access the credit line and payment history as an authorized user.
The account holder can be a family member or a friend. Also, they can be a stranger willing to add you as an authorized user. Once added, you can use the credit card for purchases. However, you are not responsible for making payments on the account.
By becoming an authorized user, your credit score can improve. This is because the payment history of the credit card account is reported on your credit report as well. Your credit score can benefit if the account holder has a good payment history. It also helps when it maintains a low balance.
Credit card piggybacking is different from co-signing. When you co-sign on a loan, you are responsible for making payments if the primary borrower cannot do so. However, when you are added as an authorized user to a credit card account, you are not responsible for making payments. Still, you can benefit from the account’s payment history and credit utilization.
How Credit Card Piggybacking Works
Credit card piggybacking works when you are added as an authorized user to someone else’s credit card account. You can access the account holder’s credit line and payment history as an authorized user, which can help improve your credit score.
To become an authorized user, the account holder must contact the credit card company and request to add you to their account. You will receive your own credit card with your name on it. However, you are not responsible for making payments on the account.
Once you become an authorized user, the account holder’s payment history and credit utilization are reported on the account holder’s and your credit report. Your credit score can benefit if the account holder has a good payment history and maintains a low balance.
It’s important to note that not all credit card companies report authorized user activity to credit bureaus. Before becoming an authorized user, it’s important to confirm with the credit card company that they report it. If they do not, you will not see any benefits to your credit score.
It’s also important to note that you are not responsible for making payments on the account. The account holder is solely responsible for making payments and managing the account. However, if the account holder misses payments or carries a high balance, this can negatively impact your credit score.
Benefits of Credit Card Piggybacking
Credit card piggybacking can provide significant benefits if you want to improve your credit score or gain access to credit. One of the primary benefits of piggybacking is that it can help improve your credit score.
Another benefit of credit card piggybacking is that it can provide access to credit you may not have been able to obtain otherwise. This can be particularly helpful if you are a little younger or have a limited credit history. By being added as an authorized user, you can start building credit without applying for a credit card on your own.
Credit card piggybacking can also be a useful strategy to improve your credit score quickly. Once added as an authorized user, you can benefit from the account holder’s good credit history.
Risks and Drawbacks of Credit Card Piggybacking
Credit card piggybacking can offer benefits. Still, you should consider several risks and drawbacks. One of the primary risks of piggybacking is that you could be held responsible for payments if the account holder does not make payments on time. This could lead to negative marks on your credit report, even if you are not responsible for making payments on the account.
Another drawback is the need for more control over the account. You cannot change the account or monitor its activity as an authorized user. This can lead to financial disagreements or misunderstandings between you and the account holder. If you and the account holder are in a personal or business relationship, financial disagreements or issues related to the credit card account could strain or damage that relationship.
Cost is another factor when you piggyback on somebody else’s credit card account. Some account holders may charge a fee for adding you to their accounts. With that, you may be responsible for paying for any charges made to the account.
Finally, there is also the potential for fraud if the account holder engages in fraudulent or irresponsible behavior. This could negatively impact your credit score. Also, it can expose you to legal and financial consequences.
Legal and Ethical Concerns in Credit Card Piggybacking
Credit card piggybacking raises several legal and ethical concerns. You should consider them before entering into this arrangement. From a legal perspective, using credit card piggybacking to inflate a credit score artificially could be viewed as fraudulent activity. This is particularly true if you do not intend to use the account or make payments on it.
Another legal concern is the potential for identity theft or fraud. Engaging in fraudulent or illegal activities on the account could expose you to legal and financial consequences. In some cases, you could even be held liable for the account holder’s actions.
From an ethical perspective, credit card piggybacking raises questions about fairness and transparency. If the account holder charges a fee, this could be exploitative or unfair. Additionally, if you are unaware of the risks and potential consequences of being added to the account, this could be seen as a violation of trust.
Alternatives to Credit Card Piggybacking
Several alternatives to credit card piggybacking may be worth considering. One option is to apply for a secured credit card. It requires a security deposit and typically has a lower credit limit. However, this can be a good way to establish a credit history and demonstrate responsible credit use.
Another alternative is to become an authorized user on a family member’s or friend’s credit card account. This is similar to credit card piggybacking. However, it has no potential legal or ethical concerns. You can use the account and build your credit history as an authorized user. Nevertheless, you will not be liable for any charges or responsible for making payments on the account.
You can also improve your credit score by paying all bills on time. Furthermore, reducing your debt-to-income ratio and disputing any errors on your credit report would help. It’s important to remember that building good credit takes time and effort. There are no quick fixes or shortcuts.
Conclusion
Credit card piggybacking can be a useful strategy if you are looking to build or improve your credit score. However, it’s important to understand the risks and drawbacks of this arrangement.
By becoming an authorized user on someone else’s credit card account, you can benefit from the account holder’s positive credit history and credit utilization. However, you may also be exposed to legal and financial consequences. This happens when the account holder engages in fraudulent or illegal activity.
Before engaging in credit card piggybacking, you should carefully consider some options. Moreover, you should explore alternative strategies for building or improving your credit score. It would help if you work with a financial advisor or credit counselor. You can develop a personalized plan that considers your unique financial situation and goals.
FAQs
Q: Can credit card piggybacking help improve my credit score?
A: Credit card piggybacking can help improve your credit score if the account holder has a good credit history and utilization.
Q: What are the risks of credit card piggybacking?
A: The risks of credit card piggybacking include potential legal and financial consequences if the account holder engages in fraudulent or illegal activity. Also, it could damage the relationship between you and the account holder.
Q: Is credit card piggybacking legal?
A: Credit card piggybacking itself is not illegal. Still, it would help if you considered legal and ethical concerns before engaging in this arrangement.
