Piggyback can lift your credit score |
|
|
| According to Instant Credit Builders
account executive Sheri Osbourne, a customer is charged $1,800 for two lines of
credit.
Fernandez says his credit score shot up to 705. He
took advantage of the better credit card offers he received and selected two.
Fernandez also was approved for a mortgage. He says he would have qualified anyway,
but probably with a higher interest rate. Tony Johnson, a
senior client consultant at Seasoned Trade Lines LLC, says the majority of his
clients come from metropolitan areas and have incomes of $30,000 and upward. The
majority of the clients have credit scores in the 600s while 5 percent to 10 percent
are in the 500s. He says cardholders and authorized users are
required to provide their credit reports. The cardholders
whose cards are used are required to have a minimum of two years of good credit
and a minimum FICO credit score of 700. Johnson says the card can still be used
to make purchases, but cardholders are encouraged not to use it. Cardholders are
encouraged to use another card as their primary card, instead. The
credit effect
Does it work? The FICO credit score
does consider authorized user payment histories in addition to other accounts
listed on the credit report, says Craig Watts, public affairs manager at the Fair
Isaac Corporation, and that can raise scores. He says the
amount the credit score is increased depends on all the credit history information
on the credit report, such as how many accounts have been delinquent and if the
individual is actively involved in bankruptcy. Some credit
card companies limit the number of authorized users on a card, others do not. Cardratings.com,
a consumer education resource for credit cards, reports that Bank of America will
permit five authorized users while American Express will allow up to 99 authorized
users. However, cardholders typically have one or two authorized users, explains
AMEX spokeswoman Desiree Fish. Most are family members, for
example parents putting a child on their card. Some banks don't
report authorized users to credit bureaus, says Cardratings.com spokesman Curtis
Arnold. For instance, American Express does report authorized users to the bureaus
while Bank of America does not. Arnold speculates two issues
stop some banks from reporting authorized users. "There
are typically costs involved anytime you report data to the credit bureaus, and
the authorized user is controversial because it's often associated with credit
repair companies," he says. Reporting by lenders to credit
bureaus is voluntary, says Steve Katz of TransUnion. Is
it legal?
Many critics claim the piggybacking approach is illegal.
Others say it's just deceptive. "Anything that defrauds
consumers would be considered illegal," says Frank Dorman, spokesman for
the Federal Trade Commission (FTC). | 
