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Piggyback can lift your credit score

Editor's note: All previous stories describing the design of FICO 08 to exclude authorized user accounts were based on information that is now outdated. FICO 08 will now include authorized user accounts in scoring.

It's called piggybacking, and like the childhood playground game, it involves getting a lift. Only with this piggyback ride, it's your credit score that gets a boost.

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Critics claim it's lenders who are being taken for a ride.

Piggybacking works like this: After paying a fee, you are listed as an authorized user on someone else's credit card, someone with a healthy credit rating. You don't actually get to use the card, but the credit history of that card appears on your credit report, making it more attractive.

Internet sites that make these connections claim that this ride on someone else's credit history can raise your credit score almost instantly. Higher credit scores mean better deals and lower interest rates on loans.

You will, of course, pay for the privilege -- often thousands of dollars.

And why would the credit card holder allow you to piggyback on his or her lofty credit rating? Simple: They get paid. They get a one-time fee of usually around $200 per user.

Critics say these sites are gaming the system and call it fraud, claiming it violates federal laws and supports identify theft. They say the credit card holders who make their credit available are putting themselves at risk too.

The "piggyback" sites disagree. It's legal, they say, claiming that not only are they protected by the law but they are also supported by organizations within the credit industry.

The technique
Most of these Internet sites offer a line of revolving credit, typically credit cards, for $1,000. Add a few extra thousand dollars and as many as five additional credit lines can be purchased. Can't shell out the cash? Payment plans are offered.

These credit lines have a history of from two years to three decades of timely payments with credit limits as high as $50,000.

Wait one to two months and the line of credit should impact your credit score. It will stay for a few months, in some cases longer, before the user is removed from the card.

Some companies offer money-back guarantees and a few are affiliated with mortgage and finance businesses that customize loan programs for the "piggyback" clients.

Tony Fernandez of San Jose, Calif., says he wanted to improve his FICO score, which was around 650, to get better loan rates. He had damaged his score with late credit card payments when he was in his early 20s. He searched online and came across Instant Credit Builders, based in Largo, Fla.

He purchased two lines of credit, becoming an authorized user on cards issued by Citibank and Chase with limits that ranged from $12,000 to $15,000. Each credit card carried a balance of about $1,000.

Next: "Many critics claim the piggybacking approach is illegal."
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