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Friday, September 17, 2010

Things That You Should Know About Credit Piggybacking


The concept of credit card piggybacking is very simple. Generally, people with bad credit use credit piggybacking so as to increase their credit score. It is a well known fact that people with bad credit don't get loans. Even if they get, they have to pay high interest rate for the loans. The simplest way to get out out of this situation is piggybacking (making yourself an authorized user to someone else's credit account).

When the debtor is added as an authorized user to someone else's credit account then, the whole credit history gets included in the credit report of the debtor. Usually, the parents use credit piggybacking in order to help their children in building their credit history.

Piggybacking abuse

This practice has been in use for a long time. Credit card piggybacking has become an easy way for the people with bad credit to raise credit scores. They can simply become an authorized user to another's positive credit card account by paying a fee. As a result, their credit score increases. Thereby, they can easily get credit cards, loans with low interest rates which would have been impossible to get otherwise.

Effect of piggybacking on credit score

Fair Isaac has altered its FICO (Fair Isaac Credit Organization) scoring model. Previously, credit piggybacking used to increase credit score. However, according to FICO 08, credit piggybacking will longer boost credit scores.

There has been a lot of controversy regarding credit card piggybacking. Therefore, financial experts don't recommend credit card piggybacking to the people with bad credit.

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