Credit Card Piggybacking = Bad Idea?

March 4, 2009 12:46 PM

Bank Fraud Filter: A friend has just asked me to add him to my credit card as an 'authorized user' as a way to boost his credit. After doing a little research, I see that 'credit card piggybacking' is a well-known credit-repair tactic. Should I help?

First off, let me say that I have excellent credit. I'm nervous about adding an authorized user to my credit card (especially since my friend has pretty bad credit) but I am reading that I don't have to give him any info about the card (or the card), just add him to the account.

After reading a bit more, I see that there are companies that you can pay and they will do this for you (in partnership with a stranger) for a fee (the company takes a cut, pays the good-credit partner).

Here are my questions:

1) Should I do this for my friend? Is there any risk to my own credit?
2) I'm also reading that FICO 2008 has eliminated the authorized user as a credit building option. Is this true?
3) Should I look into signing up with one of these companies for some extra money on the side? Why not get paid if there's no risk...

posted by shew to work & money (40 comments total)

Don't do it. If your friend was dependable with money, he wouldn't need to ask you to do this. If he's not dependable with money, you don't want to do it for him.
posted by orange swan at 12:53 PM on March 4 [6 favorites has favorites]

Can't comment on 1 or 3 but, IIRC, FICO was made aware of this a while back and it is no longer a credit building option...
posted by seeminglyshy at 12:54 PM on March 4

Don't do it. Explain to your friend that he needs to improve his credit just like anyone else -- by paying his bills in a timely manner, keeping his debt low and waiting for a few years while the evidence of his irresponsible youth falls off the bottom of his credit report.

Also, the legality and effectiveness of piggybacking are in question.
posted by M.C. Lo-Carb! at 12:57 PM on March 4

No, you should not do this for your friend. I have absolutely no concrete proof it can do damage to your credit, but if hitching his wagon to your good credit helps him, it stands to reason that his bad credit could come back to haunt you.
posted by domino at 12:57 PM on March 4

Seeminglyshy - do you have a citation for this? I've been googling all day and can't find anything for sure saying that it's been officially killed.
posted by shew at 12:58 PM on March 4

According to this, piggybacking was still viable as of June 08
posted by kimdog at 1:06 PM on March 4

Wouldn't that essentially allow him to use your credit card, if he requested a duplicate card? Might want to be careful with that. Although he may not have access to your current card, he may then be able to very easily order a new set of cards because the the old one was lost/stolen, and would they send one with his name as well, please?
posted by kellyblah at 1:06 PM on March 4

Your friend has already demonstrated (vis a vis his bad credit) that he's not responsible with his own money. What incentive does he have to be responsible with yours?
The potential risks far outweigh the potential rewards. Don't do it.
posted by DWRoelands at 1:07 PM on March 4

This article seems to think that the FICO score does currently include authorized user information.

Don't do it anyways though. See answers above for why. (Also it's kind of immoral, yeah?)
posted by nat at 1:08 PM on March 4

No, it doesn't allow him to use my credit card. He won't know which card I chose or the number or any information about it. No card will be issued, etc.

I appreciate the moral conversation, but am more interested in the actual credit risks (so far I can't find any).
posted by shew at 1:10 PM on March 4

Don't do it anyways though. See answers above for why. (Also it's kind of immoral, yeah?)

I'd be worried about it affecting my credit, if I were you.
But immoral? Against the credit companies? I wouldn't worry about that.
posted by inigo2 at 1:10 PM on March 4

does consumerist count as a citation?
posted by traco at 1:12 PM on March 4

No, it doesn't allow him to use my credit card. He won't know which card I chose or the number or any information about it. No card will be issued, etc.

Are you sure about this? In my experience, an "authorized user" has the right to get a card, use it, etc. Maybe you can find some way to set this up where he doesn't have those rights, or maybe you can trust him not to try, but I doubt it.
posted by iknowizbirfmark at 1:19 PM on March 4

Shew, this was the last article I read on the subject. Here's the blurb that stood out in my mind:

Ninety percent of the largest U.S. banks base their loan decisions on FICO scores, which currently include authorized user accounts. However, after discussions with lenders and industry officials, Fair Isaac said it intends to announce this week that all future versions of its FICO score methodology will no longer consider authorized user accounts, said Tom Quinn, Fair Isaac's vice president of scoring solutions.

The next version is slated to roll out in September to one of the three main credit reporting agencies _ Equifax Inc., Experian Information Solutions Inc. or TransUnion LLC _ with the other two agencies receiving the new version some time in 2008.

The change won't be a quick-fix for lenders trying to weed out credit renters. Corey Carlisle, senior director of government affairs for the Mortgage Bankers Association, said it takes time for lenders to transition from one scoring system to another.

Bear in mind this was in 2007.
posted by seeminglyshy at 1:20 PM on March 4

#1 in the consumerist article traco referenced: Spouses and children can improve their credit score by being an authorized user on a credit card account, but that's it. No more piggybacking off strangers.
posted by studentbaker at 1:22 PM on March 4

No, it doesn't allow him to use my credit card. He won't know which card I chose or the number or any information about it. No card will be issued, etc

Yes it does. Just because YOU don't give him the info doesn't mean he can't get it. The moment you add him as an authorized user, the account number and info goes on his credit report, which is the whole idea of course. He can simply get a copy of his credit report which likely has the account number right on it, or at least the issuing card holder. All he needs is the card number to use the card. The company would never notify you that the account had been used because, after all, you authorized him as a user.

If this were a no risk way of helping out a friend more people would be doing it.

Why not get paid if there's no risk.
They are paying for the risk.

Your assumption of no risk is wrong. You can still choose to do it, but do it in spite of the risk, not because you don't think there is any. There lies dragons.
posted by dness2 at 1:22 PM on March 4 [1 favorite has favorites]

He won't know which card I chose or the number or any information about it.

Unless he, say, looks up his free credit report online, yes? As I recall, there's a ton of information about each open credit account on your credit report, way more than enough for him to call up the card issuer and request an extra copy be sent to him.

No card will be issued, etc.

Unless he gets in a really bad jam, reasons that he can just float some money for a month or two on what may literally be the only source of credit he has (see above for how the mechanics of this would work), and predictably falls behind but keeps adding a bit more debt every month, certain that he'll be able to take care of it once and for all before you find out.

I would not do this. If you wouldn't feel comfortable having the credit card company send him a card linked to this account, I can't imagine it's a good idea to make that situation legally possible. Your friend might be a really great guy, but he's demonstrably not so great with money, and this has major train-wreck potential.
posted by iminurmefi at 1:24 PM on March 4 [2 favorites has favorites]

No, it doesn't allow him to use my credit card. He won't know which card I chose or the number or any information about it. No card will be issued, etc.

Every time I've added an authorized user (I add Mr. Rabbit to all my accounts) they've always sent me a card with his name on it. And your friend will be able to see the creditor's name on his credit report. So theoretically he may be able to get a card "reissued" to him.

FICO09 does close this loophole, but it may be years before many creditors adopt FICO09, so authorized users may continue to enjoy this form of "credit repair" for a while longer.

Also, sometimes authorized user acounts don't report unless the AU has the same last name and/or address as the primary cardholder. I'm an AU on one of my mother's cards, but it doesn' t show on my credit report because both our last name and our address are different. My spouse and I have each other listed on all our cards, and they do show up because we have the same address (though not the same last name). So sometimes adding a friend/stranger turns out to not help in the way intended.
posted by rabbitrabbit at 1:26 PM on March 4

Every time I've added an authorized user (I add Mr. Rabbit to all my accounts) they've always sent me a card with his name on it. And your friend will be able to see the creditor's name on his credit report. So theoretically he may be able to get a card "reissued" to him.

Though they would send it to your address, so your friend would have to order the card and then steal the envelope from your mailbox before you picked up your mail, so this may or may not be a concern based on your mailbox security.
posted by rabbitrabbit at 1:28 PM on March 4

No blood no money (in other words don't give money (credit) to non family members). Don't even think about this. Bad bad bad. You will lose money, you will lose your good credit, and you will lose a friend.
posted by Gungho at 1:32 PM on March 4 [1 favorite has favorites]

Another vote for "if it improves his credit, he can see it listed (bank/card info) on his credit report". The person will easily be able to get a card in his name. You may think this is not answering your question, but you asked if your credit could go down. Yes, it can, especially if this person starts charging up a storm with a card under your name and then walks away.
posted by kellyblah at 1:32 PM on March 4

You're going to be held liable for anything you are an authorized user for. That means if he doesn't pay his credit card, or files bankruptcy, you're stuck with the bad credit and the bill.

Please don't do this.
posted by Nattie at 1:40 PM on March 4

I will be contrarian, and say that you should do this. Specifically, because you have worked hard to get a good credit rating, something that others can't always get even when doing the right thing because credit ratings are a bit of magic on top of the rules even at the best of times. And this is your friend, so why not risk all you've built -- all your purchasing power, all your good credit reference for buying a house or a car or getting an apartment -- as a favor? What a selfless act it will be! Who doesn't like a martyr?

so, uh, yeah, don't do this.
posted by davejay at 1:54 PM on March 4 [1 favorite has favorites]

Don't do it. I barely trust myself with credit, let alone ANYONE (Jesus, Moses, Buddha, family) with a less than stellar history.
posted by pentagoet at 1:59 PM on March 4

This sounds like an excellent way to ruin a friendship when he ruins your credit score.
posted by wocka wocka wocka at 2:04 PM on March 4

Don't do it. If he screws up your credit score, there will be no come-back. Why risk a friendship over this? You friend has demonstrated he is poor with money, he may start off with the best of intentions. but who knows what he'll do?
Sure way to lose a friend and some money if he misbehaves. Frankly, I'm surprised he even asked you to do this, this is pushing a friendship too far.
posted by arcticseal at 2:04 PM on March 4

If your friend asked to borrow your credit card and promised to pay back whatever he needed to charge, would you give it to him and be comfortable that either he'd pay you back or you'd accept the losses? If the answer is yes, I would do it. If he's not that kind of friend, it's probably not a good idea.
posted by dreadpiratesully at 2:27 PM on March 4

i think it really depends on the friend. if they're a really good friend, and you really trust them, then there shouldn't be a problem. no one other then you--specially a bunch of mefi ninnies--are in a better position to make that judgment.
posted by lester's sock puppet at 3:18 PM on March 4

If you do this, there is a good possibility that you will eventually be posting an AskMe question about what to do now that your friend has found a way to use the credit card that you authorized him to use and has racked up a bill larger than you can afford to pay, such that your great credit score is about to be ruined. That might not happen, and maybe you're ok with that risk. But you should really analyze it before you make the decision. There's no rush, after all (and if your friend is telling you there is, that's a huge red flag).

So, here's what you do: Hold off for another week or so before you make a decision on this. Wait until you are allowed to post another AskMe question and ask this:

"I tried to help my bad-credit friend to build his credit score by making him an authorized user on my credit card. I was very careful to make sure that he did not have a card, that he did not know the credit card number, and that he did not even know what credit card company it was through. But now, he has somehow figured out a way to use the card and has racked up charges without asking me. He says that he can get me the money for the payment by the time the bill is due, and it's not that much money (just a few hundred dollars). But I am worried, because I don't have an extra few hundred dollars, and I don't know whether I can make the payment if he doesn't come through with the money by the deadline. And besides, even if I could afford it, I should not have to pay a credit card bill that he ran up without my knowledge or approval. I did not put him on the account so that he could use the card, and I feel betrayed by his taking steps to violate my trust and, basically, spend my money.

What can I do about this situation? Is there some way to have the credit card company hold him responsible for his portion, rather than holding me responsible for the whole amount? Am I making a big deal about nothing? What steps do I need to take now if I want to de-authorize him as a user of the card, and will that really prevent him from using it, now that he apparently knows the number?"

Once you have asked that question here, wait until a good number of answers have come through, read them all, and then ask yourself the following questions:

Am I cool with making a decision that has a strong likelihood of making that question necessary? Am I comfortable signing up to do the things that the answerers have now suggested? If my friend does do what I posited in my second AskMe question, is there a satisfactory solution to that problem?
posted by The World Famous at 3:50 PM on March 4 [1 favorite has favorites]

I think I fall in the "don't do it" camp as well but there isn't really enough information for me to make an informed recommendation. I know it is generally accepted that finances and friendships don't mix and as others have pointed out, bad credit tends to point to irresponsible behavior but I have had finance/friend interminglings work out just fine.

Irrespective of all that, I used to work for Citibank customer service and under no circumstances could authorized users request credit cards be sent to them; only primary cardholders could do that. Of course the friend could call up claiming to be you but that's a different issue. If you're worried about that, call the bank and tell them that you don't want cards sent to anyone but you and make them verify additional information that only you would know. They can easily notate your account to that end. These rules may have changed since I worked there but I can't imagine why it would.
posted by toomuch at 4:14 PM on March 4

Shew, I want to point out that you are using two standards of proof for the cost and the benefit side of this equation.

On the benefit side, some unnamed sites (random, trusted? we can't tell) say that piggybacking will help your friend. From your description, it sounds like these sites are in the business of promoting this method of credit repair, and perhaps would benefit from you making this choice.

On the cost side, several people here who will not benefit from your choice have pointed out specific ways that adding an authorized user can lead to abuse.

Do you trust your friend with your credit, given that they haven't been able to maintain their own? That's the central question on the cost side.
posted by zippy at 4:28 PM on March 4

I don't think this is wise, but if I was to do this for a friend I would:

1) Open a new card account at a bank where I don't do my main banking

2) Only open said account with a super-low credit limit, and make sure it was one where the limit is set and doesn't get raised automatically

3) Still not give your friend a card or tell them about it, even though, of course, they can find out easily enough

It's still not a smart thing to do, but at least if you make him an authorized user on a card with a $500 or $1000 limit that would be the end of your worries. My main Visa card has a $25,000 limit, I would be in serious hurt if an authorized user decided to spend a long weekend in Vegas on it.

My other (probably groundless) worries would be "authorization leakage" -- can this person use their newly autorized status to get hold of other information on me -- and identity theft -- can this person acquire my SSN or other sensitive information more easily once they're on my account?
posted by maxwelton at 5:09 PM on March 4

There are few things I would never do for a friend. This is one of the very few non-sexual ones.
posted by coolguymichael at 5:10 PM on March 4

One of the two rules I live by:

Complicated situations which rarely work out will not work out any better for me just because my friends and I are special.

No, don't do this. It will not end well. Building good credit (which I have) or building a healthy, fit body (which I don't have) are products of choices.

BTW: How does your friend know you have excellent credit? Maybe bragging isn't the best of ideas.
posted by Classic Diner at 5:12 PM on March 4 [1 favorite has favorites]

No, it doesn't allow him to use my credit card. He won't know which card I chose or the number or any information about it.

You are wrong. This is exactly what "authorized user" allows.
posted by Ookseer at 6:34 PM on March 4

If you make him an authorized user, you'd definitely be doing him a favor credit-wise. It shouldn't hurt your credit. But please -- do not let him know your credit card number!
posted by floam at 7:32 PM on March 4

No, it doesn't allow him to use my credit card. He won't know which card I chose or the number or any information about it.

Well, if he checks his own credit report, he'll know the issuing bank. He'll also know how much credit it has, and how much/when you make payments. Depending on how smart he is and what he knows, he might be able to piece together exactly which card it is. He won't be able to get a CC number, so it comes down to I wouldn't do this if you don't trust the guy not to rob you.
posted by floam at 7:35 PM on March 4

I agree that doing this is ill-advised unless the guy is absolutely trust-worthy and someone you'd donate a kidney for. I don't know about the legal/ethical issues -- I assume it's OK but feels a little fishy. Ethically, you are basically helping him boost his score to get more credit than he 'deserves' based on prior history. How different is this from mortgage brokers falsifying income? Legally, I suspect it's OK so I suppose you're playing by the rules, and a friend is a friend . . .

If you are planning to go through with this, do a bit of searching to figure out whether it will really help his credit. Then, apply for a new credit card with a really low limit (or lower the limit on one of yours that you're not really using) and add him as an authorized user to that account. Make sure he can't request an increase. Don't put much stock in him not being able to find out the card number -- you need to trust him just as much as if you gave him the card but made him swear to not use it under any circumstances.
posted by bsdfish at 11:30 PM on March 4

Opening a new card is a sure way to drop your credit score. Much of the FICO score calculation is a mystery, but one of the things that is 100% known is this.
posted by Ookseer at 11:55 AM on March 5

Ookseer, that's actually not the case. The inquiry will usually ding your score. If you have a relatively long file, the reduction in average account age won't matter, and the improvement in your utilization may in fact improve your score if your utilization was high to begin with.

Basically, opening the account could impact your score negatively, it could impact it positively, and more likely won't make a big difference either way (maybe 10 points, which usually isn't important)

Additionally, you're not really lending someone your score, you're lending them an account with age, low utilization, and good payment history. A new account with a low limit is essentially useless for this purpose, unless the friend recently declared bankruptcy or something of that nature, in which case the post BK good behavior can actually make a difference.
posted by wierdo at 11:29 PM on March 5