The golden-age of piggybacking isn’t over yet!!!
One of the best-kept secrets to instantly improve your credit score just stopped working as of February 2008 when Fair Isaac & Company better known as F.I.C.O. made significant changes to its credit scoring model. For many years people were able to benefit from other peoples credit by simply being added as an authorized user. The primary’s credit card account would suddenly appear on the authorized user’s credit reports and the scores would be recalculated with this aged positive account. This technique was referred to as piggy-backing. Creditors & Lenders were up in arms over this unfair advantage and quickly began protesting it with F.I.C.O. They protested this unfair advantage because it meant that they were going to fund loans and credit with credit scores that were not accurate and in the long run they were going to loose money. It is obvious that this is true because the extremely high rate of foreclosures and bankruptcies in recent years. Some people believe that this horrendous mortgage and bankruptcy crisis is due to unfair advantages like piggy-backing because people have obtained credit that otherwise could not have been obtained and are now defaulting.
Not only has the subprime meltdown made almost all credit harder to come by, Fair Isaac & Company has announced major changes to its formula. As a result, some actions that may not have hurt your score much in the past could cause your scores to go down or drop substantially, while other behaviors could help you boost your score more than it used to.
If you want some examples, take this for instance:
- Keeping your balances high on your credit cards could hurt more.
- Actively using your credit accounts is more important.
- Having a mix of different credit accounts (revolving, installment, auto or mortgage) will help you more because the new formula has a greater impact on your credit score simply because your ability to handle different types of credit.
- Applying for new credit accounts may not affect you as much.
Some things about the latest revision to the score, referred to as F.I.C.O. 08, will stay the same. F.I.C.O. 08 will have the same 300 to 850 range as the classic F.I.C.O. score in widespread use today, with higher scores indicating lower risk of default will lower interest rates, cheaper insurance premiums, better deals on mobile phones and lower utility deposits, to name just a few of the ways credit scores are used. F.I.C.O. says most consumers will see a slight increase in their F.I.C.O. 08 scores compared with their classic F.I.C.O numbers, but others will see a drop.
These changes, specifically being added as an authorized user no longer affect your score; so if you have accounts which you are an authorized user on, these accounts will be completely moot and will not be calculated your credit score.
There was a brisk and very brief business which sold a place on someone else’s credit card as an authorized user. If you were one of these people who paid to benefit from someone else’s credit, it no longer works.
There is however; a piggyback technique that does work and very few people know about it. The only way you can piggyback now is to get added as a “Joint” account holder, which definitely has its disadvantages but it can season and increase your credit scores and that is what really matters. Here is how it works:
1st - Find someone you trust. This person must have a credit card account with a major bank in good standing with a low or preferably no balance and be willing to add you as a “Joint” account holder.
2nd - Contact the credit card company and request to be added as “Joint” account holder.
3rd - Monitor your credit reports to make sure it gets reported to the credit reporting agencies.
That’s it, you’re done. Provided you did everything correctly; this account you were added to should show up on your credit reports with one or more of the major credit reporting agencies Equifax, Trans-Union and Experian within 60 days or less. The next time a lender pulls your credit report for a credit application; F.I.C.O. will recalculate all (3) credit scores and include the joint account as if it was yours. The entire payment history will appear and get calculated into your new F.I.C.O. scores.
Please remember you can also piggyback new accounts by applying jointly but the secret about piggybacking is the fact that F.I.C.O.’s scoring model will take into consideration the years of previous payment history which took place before you were added to the account. For example, if you piggyback an account that was opened in 1990 you just added over 18 years of payment history that gets calculated into your scores. If you open a new account like a car loan, credit card, mortgage or installment loan by applying jointly; that is a new account which will actually affect your score negatively for at least awhile. Of course as time progresses, payments are made and the account ages; the account will begin to affect your credit in a more positive manner.
The disadvantages to piggybacking as a joint account holder are as follows:
- You are equally responsible for the account.
- You cannot remove your name from the account until it is paid and closed.
- If the primary defaults you are responsible for the balance.
- If the primary is late or defaults, it will affect your credit.
Make sure that the primary account holder is a responsible person and intends on paying the on time and keeping the balance low otherwise there is a good possibility that you will end up with problems. It’s almost as if the primary is cosigning on a loan for you but the primary can also get you in trouble so be very careful and use this to your benefit, not to your demise.
Follow these instructions and techniques and you will see your credit score skyrocket. When you are ready for your next home loan purchase or refinance, please keep us in mind. We have many lenders in our nationwide network and we will shop your loan for you. When lenders compete for your business you will get you the lowest rate and best possible terms; guaranteed. Also, please remember we offer affordable and effective credit improvement service.