If you’ve gone in search of ways to boost your bad credit score, you may have encountered a trick called “piggybacking.” It’s a tactic that credit repair services use to raise a consumer’s score simply by adding them as an authorized user on accounts in good standing. These accounts typically include long credit histories, high credit limits and relatively low balances—all factors that the FICO scoring model loves to see. The result: the consumer with bad (or no) credit suddenly reaps the benefits of “piggybacking” on someone else’s good credit. It sounds like an easy fix to a typically difficult problem—after all, it usually takes a lot of time and effort to build good credit. However, this fix won’t work for everyone, despite what credit repair companies want you to believe.
A few years ago, the creators of the FICO credit scoring system announced they would stop including authorized users in the latest version of their FICO scoring model (at the time dubbed FICO 08), which would effectively put an end to what they saw as a deceptive practice and manipulation of the system. They later reversed their decision after consumer advocates observed that FICO 08 could unfairly impact women and/or stay-at-home spouses, and lenders’ concerns that using the new model would impede their compliance under Regulation B—which requires lenders to consider credit histories on accounts shared by spouses when assessing a married person’s credit risk. (The CARD Act received a similar backlash for discriminating against women earlier this year for mandating that credit card issuers “consider information regarding the consumer’s independent income, rather than his or her household income” before approving a new card or credit limit increase under the new law.)
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FICO’s change of heart was a welcome relief for many lenders and consumers alike, but the scoring giant was determined to put an end to growing number of credit repair clinics exploiting the loophole to trick the system. FICO’s solution? In traditional FICO style, keeping a tight lid on the secret to their proprietary special sauce, the company announced that their staff of analytic scientists had found a way to include legitimate authorized users in the FICO 08 model while weeding out the illegitimate authorized user accounts of piggybackers.
How Do They Do It?
Legitimate authorized users include spouses, parents and children; anyone who would have a legitimate relationship with the primary account holder and a reason to share access on their account. While FICO won’t release the details on how they determine a legitimate authorized user versus a piggybacker, it’s not difficult for consumers themselves to come up with a few theories on how they weed them out. Given that FICO scores only consider information reported in your credit reports, they’re able to pinpoint whether or not the authorized user has a genuine relationship with the primary account holder. Maybe they evaluate and take into account the last names of the authorized user and the primary account holder, maybe they factor in previous and current addresses, or even possible flags that exclude cards with more than a certain number of authorized users—or possibly a combination of all the above. The last would catch the accounts that are hosting 5, 10, or even a 100 authorized users—which was actually taking place during the piggybacking heyday. The point is, you don’t have to be an analytic scientist or even know exactly ‘how’ they do it, just understanding from a very basic observation level that credit report data does give tell tale signs of piggybacking, it wouldn’t be extremely difficult to weed out the folks trying to game the system.
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So why are we still talking about piggybacking several years after the fact? Two reasons. One, we’ve recently seen an influx of comments and questions about piggybacking services here on Credit.com’s blog, along with several credit repair companies claiming that piggybacking still works. This means that whether or not piggybacking is working, there are companies still selling the idea to consumers looking for a quick fix. Second, Credit.com recently reported on the the implementation of FICO 08 by mainstream lenders.
According to FICO, FICO 8 is being used by more than 3,500 lenders and many more are in the process of adopting or completing their evaluation of the score. As far as big banks go, we know that Citi recently announced their adoption of FICO 8, and BofA is currently in the process of implementing the new, more predictive model. A vast majority of loans are conducted by the major banks but at this point, it’s unclear exactly which major banks are using the newer version because Citi and BofA are the only two to publicly share the details. And we may never know simply because banks typically do not actively share this information with the public.
While the adoption rate of FICO 8 may appear to be a slow process from a consumer perspective, it’s actually one of the quickest adoption rates in the history of the FICO scoring model. According to Craig Watts, public affairs director at FICO, “The lender adoption rate for FICO 8 Score has been faster than the adoption rate of any previously redeveloped FICO credit scoring model since the score was introduced in 1989. That’s particularly impressive now, during the biggest economic downturn since the Great Depression.”
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So what does this tell us? It means that even though banks and lenders are gradually adopting the new model, there is a possibility that your lender has not yet migrated to the new score and may be using the previous version of the FICO model when making their lending decisions. And since the previous model doesn’t include the piggybacking fix, many consumers have no way of knowing whether or not this loophole strategy of gaming the system is even an option for them.
So, to reiterate, in answer to the question: Piggybacking to boost FICO scores: Does it still work? It does if the lender isn’t using the latest model—FICO 8.
Before you rush off to sign up for a quick FICO fix, here’s a little food for thought: Even if you sign up with one of these companies and fork out a few thousand dollars in an attempt to beat the system, it’s not a guarantee that the lender you’re applying to isn’t using the latest FICO model. Your best bet? Do it the right way. Instead of trying to beat the system, earn it. It’ll make all the difference in the world in the opportunities and options that open up simply by having the perks that having excellent credit affords.
Have you recently signed up with a piggybacking service? What did it cost you? Did it work? Share your story in the comments section below.
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Image: Theyoungones1994, via Flickr.com
[Author note: This article was updated to address the speed of implementation and adoption rate of the latest FICO 8 scoring model-- 10.7.11]