Does Piggybacking Help Your Credit Score?

A common strategy among consumers with bad credit is to use someone with good credit to get loans, also called piggybacking or co-signing. This can work -- somewhat. The credit bureaus have a high success rate of determining whether someone piggybacks on another person's credit for legitimate reasons or to circumvent the traditional credit scoring system. Thus, you may still have to build credit using individual accounts.

Identification

Piggybacking can boost your credit score because co-signing on a loan also means you share the payment history on the account. For instance, if you make an on-time payment, your credit report also receives an on-time payment. This is a common tactic for people who cannot obtain credit, such as those trying to build a new credit history or rebuild a poor one.

Considerations

The piggybacking tactic gave credit repair companies an easy loophole to help customers with poor credit, so for several years the credit bureaus ignored authorized accounts -- credit card accounts that give you use the card but not the responsibility for it or access to account settings. In 2007, the designer of the dominant credit scoring in the U.S. -- the Fair Isaac Corporation -- allowed authorized accounts to impact credit ratings because it found a way to weed out fraudulent accounts. A creditor must use the FICO 08 model for an authorized account to boost a credit rating, however, and not all creditors have upgraded to this version of the FICO software.

Danger

You can damage the other borrower's credit rating too if you piggyback on an account and miss a payment. For example, if you co-sign or become an authorized user on a credit card and max out the limit, together you may not have enough money to pay the minimum balance due. Missed payments can cause the other borrower's and your score to drop by more than 100 points and a maxed-out card can cost you more than 45 points, according to Ellen Cannon of Bankrate.

Tip

Only piggyback on accounts owned by trusted friends and relatives. Credit repair companies sometimes offer to list you as an authorized user for a fee, but this probably won't help you as of 2011. Instead of piggybacking, you can get a department store or gas station credit card with a low limit and make on-time payments to reestablish a record of positive payment history. Also, eliminate debts listed on your credit report and never use more than 25 percent of any line of credit.