Forget Piggybacking, Get a Secured Credit Card Instead
Ever notice how many good things can be ruined by a greedy few? Piggybacking to raise your credit score is one of them.Before unethical credit repair companies started brokering the rental of authoriz...
Ever notice how many good things can be ruined by a greedy few? Piggybacking to raise your credit score is one of them.
Before unethical credit repair companies started brokering the rental of authorized user slots on credit cards, piggybacking was a good way to help your children, siblings, or even friends establish a good credit rating.
All you had to do was add them as an authorized user, and your good credit rating would, at least in part, transfer to them. That is, assuming you always carried a low balance and paid the bill on time.
Even though the other person wasn't using the card, its entire history would be included in their credit report, lending them financial credibility through a positive account.
How better to send your children off into the world of finance than to lend them your own good credit rating?
But, like so many other good things, someone saw a way to profit from it, and ruined it for everyone else.
Bad credit repair companies were making a mint from this practice - charging each user a fee in the range of $600. But it didn't take long for the credit bureaus to see that the majority of these "authorized users" weren't family members and to recognize it as a fraudulent practice. So... they decided to stop counting authorized user accounts in their reporting.
You can still help...
The good news is, if you have a few extra dollars to spare, you can still help someone you love establish credit. Simply deposit a set amount of money into a savings account in your child's name - and let him or her use it as collateral to obtain a secured credit card.
By carefully using less than 30% of that amount each month, and paying it back in full each month, your child (or other loved one) will establish credit in his or her own name. Before long, their on-time payment history will be established, and they can get their own unsecured credit cards. Then your money will be returned to you, with interest.
Do be sure that your child gets a secured credit card, as opposed to a pre-paid credit card. The issuers of pre-paid cards don't report to the major credit bureaus, so paying on time for the next twenty years wouldn't establish a good credit history. That is the whole point of the secured card, to establish good legitimate credit scores.
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