Piggybacking on a strong credit card account can boost a credit score. What to do when an account goes sour?
I was the second card holder on a credit card account my mom opened when I turned 18. It was meant to build up my credit since my mother at the time had excellent credit. Fast forward 7 years later and my mom files for bankruptcy and this particular credit card has adversely affected my credit rating. Is there anything I can do? Or am I stuck with the negative credit rating? Brent
The phrasing in your question gives me pause. If you are an authorized user, skip ahead to the discussion on piggybacking. If not, read on.
If you are a co-signatory on the credit card, then you may have a bigger problem than a damaged credit score. If you are a co-signatory, in other words a joint account holder, then you are liable for the balance of the credit card not discharged in the bankruptcy. If you are an authorized user, then you have no such liability.
Adding an authorized user to a strong account is known as "piggybacking." Before 2007, authorized users got the benefit (or harm) from that account’s history. If a particular account’s history contained on-time payments and low account balances and a long history, the authorized user got the benefit of that strong history. Conversely, if an account was rife with late payments and high balances, the authorized user’s credit score was damaged.
In 2007, Fair Isaac Company, the creator of the FICO score, reversed the long-standing policy of counting piggybacked accounts on an authorized user’s credit score. In 2008 Fair Isaac reversed the 2007 policy, and then in 2009 it announced another refinement when it rolled out FICO 08, the latest edition of its scoring algorithm.
The FICO 08 press release reads in part, "FICO 08 helps lenders protect against authorized-user account ‘piggybacking’ by incorporating new patent-pending technology that materially reduces the potential score impact associated with the abuse of authorized user accounts. By considering authorized user accounts in score calculations, FICO 08 continues to support lenders’ abilities to comply with federal regulations."
In other words, if a potential lender is using FICO 08 software (the current version in 2009), and it encounters a consumer who is an authorized user on a spouse’s seasoned and good-credit credit card, that user will get a boost in their credit score. On the other hand, if a potential creditor is using FICO 08 software and it encounters a consumer who is an authorized user on a seasoned and good-credit credit card owned by a non-spouse, that consumer’s credit score will not be boosted.
Regardless, it is in your best interest to stop piggybacking on your mother’s damaged credit card account. Ask her to contact the creditor and remove you as an authorized user. Then wait 60 days and go to AnnualCreditReport.com and get a no-cost credit report from each of the three main consumer credit reporting agencies in the US. Dispute any incorrect information, including any mention of your father’s accounts on your credit report. See Credit Report Errors.
In this case, it appears that whatever means you used to determine your credit score is not using FICO 08. Piggybacking is no longer the sure-fire way of boosting a non-spouse’s credit score. At best, piggybacking with a non-spouse will create uneven results depending on if the creditor is using FICO 08. If the creditor is using some other software to calculate the debtor’s credit score, it is anyone’s guess if piggybacking on a seasoned account will create positive or neutral results.
For more information on credit reporting and credit scores, please visit our credit information and resources page.
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