Piggybacking

Piggybacking is a process by which a person who has a good credit score can help another person who does not have a good credit score to boost his/her credit score. This is done by making the latter an authorized user of the credit card of a person who has a good credit score. This process has been in operational for many years, whereby parents who want their children to build up their credit score, add the name of their children as authorized user of the credit card they hold. Now the parents try and make up regular payments on these credit cards and repay the debt on time. This repayment history not only got reflected on the parent’s credit report, but also got reflected in the credit report of the children, thus enabling their children to build up a good credit score or the FICO score.

Though Piggybacking has a positive impact for building up a credit score for children by their parents, it has always been misused by people fail to pay back the debt on time. Since delinquency gets reported in the credit report and lowers the credit score, these people use to take help from private companies, who used to add bad credit consumers to the credit cards of people with good credit history for a fee, without giving them the right to use or even see the credit card. This simple authorization was enough to boost up the credit score.

This system of piggybacking therefore posed a difficulty for the creditors to judge the creditworthiness of a borrower because a person who is applying for a new line of credit with a good credit score may not have a good repayment history as he is using the credit history of the primary credit card holder to increase his score. To help the creditors to get out of such situation, Fair Isaac has developed a new FICO 08 scoring model which would bar piggybacking. As per the new FICO 08 algorithm only primary user’s credit report should reflect his credit history and it should not be reflected in the credit report of the authorized user. This has both a positive and a negative side. On positive side, it would be easier for the creditors to judge the creditworthiness of the borrower because the credit score of the borrower would reflect his own credit history and on the negative side, it would be very difficult for the parents who has been building a credit history for their children, can no longer do so. Instead these parents have to provide their children with a secured credit card and train their children the secured ways to use these cards so that they can build up a good credit score.