What Is Piggybacking Credit?

Much as the term "piggyback ride" refers to an adult allowing a child to ride on her back, a credit piggybacker uses an established credit card user to help build his credit history. When piggybacking credit, an individual with poor or little credit history can game the credit scoring system to obtain loans and interest rates that he cannot obtain on his own merit by enlisting the help of a credit repair service or friends and family.

Process

An established borrower will add a piggybacking individual as an authorized user on one of his credit cards. The credit bureaus will then consider the piggybacker as having an old, established credit line. An established borrower may use this process to help a relative or friend improve or build her credit history and improve her score. If an individual doesn't know someone who can help him with this process, some credit repair companies allow individuals to piggyback off a stranger's credit for a monthly or set fee, according to Mortgage News Daily.

Considerations

Since the Equal Credit Opportunity Act of 1974, credit card issuers must report an account holder's spouse to the credit bureau if he is an authorized user on a credit card account. Credit issuers decide to report all other authorized users on an individual basis, so individuals should check with the card issuer before piggybacking off of someone else's credit. The three major credit bureaus still count authorized users in the credit scoring process as of August 2011, but scoring standards may change in the future.

Benefits

Since credit line age, amounts owed and payment history count for 80 percent of a Fair Isaac Corporation (FICO) score, piggybacking credit can raise an individual's credit score significantly, according to MyFICO. This score increase can translate into significant savings on interest rates when the individual shops for a new vehicle or a home mortgage. For individuals with horrible credit or no credit file, piggybacking can make the difference between receiving a loan at any rate and not receiving a loan at all.

Warning

Since the piggybacking individual has access to the credit account and personal information of a more established borrower, individuals may have difficulty finding someone who will let them become an authorized user on a credit card. If the established user keeps high balances or doesn't make his credit card payments in the future, these delinquencies can actually worsen the score of the piggybacker. Due to these risks, most piggybacking individuals do not remain authorized users for long, so they only have a short time window to shop for a home or vehicle loan.