Piggybacking on a Credit Card
The best way to piggyback on someone’s credit is to ask a family member with excellent credit to add your name as a user on their card. This way, you become qualified for a card even if your credit history is thin or nonexistent based on their favorable credit. Often college students can use this method by asking a parent to add them as an authorized user to their credit card. Then the card’s history becomes part of that person’s own credit history, therefore establishing credit.
If you’re able to take advantage of piggybacking on a parent or relative’s credit card, it is wise to use the card for expenses that you know you can pay off immediately. Otherwise you can damage the cardholder’s credit. By only charging amounts you know you are able to pay off, you’re learning to use credit in an appropriate way.
Even if you never use the credit card to pay for anything, you’ll establish credit history if you are an authorized user of the card. This will automatically happen since most card companies update the credit bureaus with the names of authorized users added to an account.
Paying to piggyback
Another way to piggyback on someone’s positive credit record is to find one of the internet-based services available that pairs individuals who want to establish credit with people who are willing to add you as an authorized user to their card for a certain time period. This way, even though you never actually use the card, after a few months, the original card user’s credit history will appear on your credit report. This completely legal process enables you to establish your own credit record.
It’s not without drawbacks, however. In order to piggyback this way, you have to be willing disclose your personal information and Social Security number to someone you don’t know, with no guarantee that you’ll be approved for the process. And this service is expensive, ranging from $1000 up, depending on the strength of the credit card holder’s history. Older, more established accounts will cost even more. When your time period of piggybacking is over, your credit score may fall again unless you’ve been able to find other ways to strengthen your individual credit record, such as taking out and paying off a loan or credit card of your own.
While this is a legal service to take part in, credit experts don’t recommend it. Adding your name to an unknown person’s account carries with it certain risks. There’s no guarantee that the individual will continue to have the type of positive credit they’ve always had.
The Better Way to Piggyback
It’s always more advisable to ask a family member with strong credit history if you can become an authorized user on their account instead of using a paid service attached to an individual you don’t know personally. If you’re able to piggyback on a close relative’s credit, the next step should be educating yourself about good credit habits and how to earn an excellent credit rating. Once you’ve got an understanding of responsible credit management, investigate applying for a secured credit card in our own name. After 6-10 months of on-time payment, your credit history will reflect a positive record.
When you do get your own credit card, pay on time, and pay more than the minimum amount due, if possible. Late payments not only rack up charges and more interest, but have a negative effect on your credit record. In addition, just because you have a credit limit does not mean you should spend that entire amount. Keeping balances low proves you are able to control your spending and not overextend yourself financially.
People who have perfect credit know that consistently using credit cards wisely and always paying them on time is key. Starting these habits now means that if you ever need to take out a major loan, such as a home mortgage, your credit record will be spotless and you’re in prime position to be approved.