Obtaining a credit facility can be difficult, especially if your credit history is not good. Lenders do not take the risk of giving credit to people who previously have a non-repayment history. That is why building your credit is crucial even though it can be challenging.
There are several approaches you can use to boost your credit. You can apply for a secured credit card or a loan for credit building. Another approach that is becoming increasingly popular nowadays is credit piggybacking. Here, a person adds you to their credit card as an unauthorized user to help you build your credit.
Credit companies report the activities of the authorized credit card holder to credit referencing bureaus. However, not all companies submit this report. Before entering into this agreement, you should know whether the credit card company submits the activity report or not. Credit piggybacking can be traditional or for-profit. In this article, were focusing on for-profit piggybacking and its potential risks.
So what is for-profit piggybacking?
This is form of piggybacking where a credit card company helps you piggyback as an authorized user on a credit card that is not yours. You can be paired with a person you don’t know anything about. The company will then charge you a certain fee for facilitating the connection.
The idea is that you can piggyback on a stranger’s credit card, but the concept can be very risky. It is advisable not to be added as an authorized user until you can confirm that the primary holder of the account is a trustworthy individual. Unless you do that, then it is better you go for tradeline packages to boost your credit. The risks associated with for-profit piggybacking include:
Your credit card activities might not be submitted to credit referencing bureaus
As stated above, credit companies are the ones that submit a report on the credit card activities to consumer credit referencing bureaus. If that is not done, then all of your efforts can go to waste. Imagine working hard as a responsible authorized user and then ending up reaping nothing.
Before you find yourself in a situation like this, it is important to contact the credit card company before making any commitments. This will help you know whether the company reports all of the authorized user card activities. Though this information might not be disclosed to you, it is worth giving it a try.
Sometimes you can be paired with an irresponsible account holder
One of the biggest challenges that face piggybacking is getting someone agree to add you as an authorized user. This is because a person you do not know could do some irresponsible spending that will end up sinking your credit card. Unless this person is a friend, sibling, or parent, few are willing to take such risks.
You will not always be paired with an irresponsible user. Something good can also come from this agreement. If the user follows good credit practices, you get to benefit, too. However, if the added person shows signs of irresponsibility, consider calling the credit card company so that their names can be removed.
For-profit piggybacking can be a means of boosting your credit, but several risks accompany it. Worse still, your data can be left vulnerable, leading to cases of identity theft. Building your credit is not something that you can do overnight, it is a journey. There is no single activity you can do to that is guaranteed boost your credit.