Opening an account with a cosigner or guarantor is one way to piggyback on someone

What Is Piggybacking for Credit?

What is credit piggybacking? If you’re not sure what this strange term could possibly mean, you’re definitely not alone.

Credit piggybacking, also referred to as “credit card piggybacking” or “piggybacking credit,” is a commonly used credit-building strategy. However, many people are still unaware of how to access this strategy and use it to their advantage.

In this article, we’ll define what piggybacking for credit means and how it can help your credit.

Credit Piggybacking Definition

The general definition of credit piggybacking is building credit by sharing a credit account with someone else. For example, spouses, business partners, and parents and children are all common examples of people who often share credit.

There are three main ways in which credit piggybacking can take place, which we discuss in more detail in “The Fastest Ways to Build Credit”:

Opening an account with a cosigner or guarantor is one way to piggyback on someone's good credit.

Opening an account with a cosigner or guarantor is one way to piggyback on someone’s good credit.

  • Opening an account with a cosigner or guarantor, which is someone who promises to be responsible for the debt if the primary borrower cannot repay it. If the cosigner or guarantor has good credit, the borrower may be able to qualify for credit that they could not qualify for on their own or qualify for better terms.
  • Opening a joint account with another person, which means both parties have full access to the account and are both held fully responsible for the account. By opening a joint account with a partner who has good credit, a person with less-than-ideal credit may be able to open an account that they wouldn’t have qualified for on their own or get more favorable terms.
  • Becoming an authorized user for the purpose of credit card piggybacking, meaning you are not responsible for the debt, but the entire history of that account may be reflected in your credit file, regardless of when you were added to the account.

When people talk about piggybacking credit, they are usually referring to the method of piggybacking using authorized user tradelines.

How Does Authorized User Piggybacking Work?

Here’s how piggybacking works as an authorized user:

  • When you are added as an authorized user to someone’s credit card, often (depending on the bank), the full history of that account will then be shown in your credit report, regardless of when you were added to the card.
  • Therefore, piggybacking can almost instantly add years of perfect payment history to the authorized user’s credit file.
  • Authorized user tradelines can affect many important credit variables, such as your average age of accounts, age of oldest account, overall utilization ratio, number of accounts, mix of accounts, and more.
  • Historically, only the wealthy and privileged were able to use piggybacking as a credit-building strategy. Now, there is a marketplace where tradelines can be bought and sold, which is helping to democratize the credit system and provide equal credit opportunity.

Be sure to read the other articles in our Knowledge Center to get all the details on how tradelines work.

Piggybacking went all the way to Congress, which upheld consumers’ rights to use authorized user tradelines.

The issue of piggybacking went all the way to Congress, which upheld consumers’ rights to use authorized user tradelines.

Is Piggybacking Credit Legal?

While Tradeline Supply Company, LLC does not provide legal advice, we can provide evidence that supports the idea that piggybacking credit is legal.

Firstly, piggybacking for credit is an extremely common practice that has been in use since the advent of credit cards. Studies estimate that 20-30% of Americans who have credit records have authorized user accounts in their credit file.

In addition, about 25% of people who have credit reports initially established their credit files by piggybacking in one way or another.

Many banks actually encourage consumers to add authorized users for the express purpose of boosting their credit scores.

You may have heard about FICO trying to take away authorized user privileges in 2008. But what you probably didn’t hear about was FICO backing down after a congressional hearing that involved the Federal Trade Commission and Federal Reserve Board.

During the hearing, FICO admitted that they could not legally discriminate between spousal AUs and other users, because this would unlawfully violate the Equal Credit Opportunity Act.

Since the U.S. Congress has upheld consumers’ rights to use authorized user tradelines, it seems reasonable to conclude that authorized user tradelines are legal.

For more information on this topic, check out our article, “Are Tradelines Legal?

However, it is important to get your tradelines from a reputable source. Some tradeline companies use illegal credit profile numbers (also known as CPNs) to mislead creditors as well as consumers. That’s why consumers should only work with tradeline companies that don’t use or sell CPNs—learn more about CPNs and why Tradeline Supply Company, LLC does not accept them.

Does Piggybacking Credit Still Work?

As we discussed in “Do Tradelines Still Work in 2020?”, credit piggybacking still works, and we think it will be around for a long time.

Piggybacking credit is a well-established credit-building strategy that has been defended in Congress and promoted by banks. It is a significant part of our credit system.

Thanks to the Equal Opportunity Credit Act, authorized user tradelines are still a very important factor in credit scoring models.

Not only that, but even if FICO were to devise an algorithm intended to exclude piggybackers, it would be quite some time before lenders could implement it on a large scale. The slow-moving financial industry is still using FICO scores that were developed decades ago.

Piggybacking companies bring together buyers and sellers of authorized user tradelines.

Piggybacking companies bring together buyers and sellers of authorized user tradelines.

What Do Piggybacking Companies Do?

Friends and family will often allow each other to piggyback, but for many people, it’s difficult to find someone with good credit to piggyback on. A third party can play a role in helping to connect people who are looking to purchase seasoned tradelines with people who have high-quality tradelines to offer.

Piggybacking companies, more commonly referred to as tradeline companies, simply facilitate the buying and selling of authorized user tradelines.

The tradeline company acts as an intermediary by marketing the tradelines to consumers, protecting the identities of the clients, and preventing fraud.

At Tradeline Supply Company, LLC, we provide an innovative platform through which users can buy and sell tradelines entirely online. We also provide educational resources so consumers can familiarize themselves with the credit system and how piggybacking works.

How Long Does Piggybacking Credit Take Before I See the Tradelines on My Credit Report?

The account you are piggybacking on can show up on your credit report in as little as 11 days, depending on several factors relating to the particular tradeline.

Each piggybacking tradeline has its own reporting cycle, and Tradeline Supply Company, LLC provides a “purchase by date” before which you must purchase your tradeline in order for us to guarantee that it will post in the coming reporting cycle. If you miss the purchase by date, it will simply show up in the following cycle.

If you have purchased a seasoned tradeline that you believe has not posted, first, check to make sure that the entire reporting period has passed, then check your credit reporting service again to verify that it still has not posted. If you take these steps and determine your tradeline has not posted, please reach out to us for support and we will rectify the situation.

Can Piggybacking Hurt Credit?

If credit piggybacking is done incorrectly, it can actually backfire and hurt your credit.

Piggybacking for Credit

Because the full history of the credit account is reflected in the credit file of the piggybacker, that means any derogatory factors will show up, too.

For example, if the account has any late or missed payments, that could hurt the authorized user rather than help. Similarly, a high utilization ratio on the account could also damage the authorized user’s credit.

That’s why we recommend going with a reputable piggybacking company who guarantees a perfect payment history and a low utilization ratio (15% or lower) on all tradelines. This will virtually eliminate the risk of your credit being hurt by these factors.

The only other way piggybacking could hurt your credit is if you choose the wrong piggybacking credit card. It’s essential to choose the right tradelines for your credit file. To do this, you’ll need to figure out your average age of accounts and how adding a tradeline could affect this statistic.

For example, if your average age of accounts is five years and you decide to piggyback on a tradeline that is two years old, this would bring down your average age of accounts, which is the opposite of what you want to achieve with tradelines.

For this reason, it’s important to use our tradeline calculator to see where you stand, and to check out our tradeline buyer’s guide before you choose a tradeline.

Let us know if this article on piggybacking for credit helped you, and please share it with your friends!

Credit Card Processing: The Working Mechanism Behind the Whole Process

Having the intimate knowledge about the inner-workings of the bankcard system is not mandatory but then there’s no harm in knowing it. Understanding how things actually work is a good approach, as fees are incurred at times at one or the other stage. The main components in the whole process involve:

1. Key players
2. Credit card authorization
3. Credit card clearing and settlement

Credit card processing services are so quick and timely that within few seconds, transaction details are transferred from the terminal to a processor. Later, this information is passed through the card network to the issuing bank. Once all this happens, the issuing back sends an authorization back to the processor via the network.

In the whole system, obtaining an authorization for a transaction remains the first step. Before the sales are deposited in the bank account of the business, it is necessary that the authorizations are settled. Settlement and authorization are the two major processes of transaction. If ever this happens a failure be it complete or partial, it leads to sales not deposited or increased costs.

The Key Players

Key players involved in authorization and settlement include:

1. Customer
2. Service Provider
3. Acquiring Bank
4. Issuing Bank
5. Card Associations (Visa and MasterCard)

Let’s discuss every player one by one.

1. Cardholder: This term refers to the one who gets a credit or debit card from an issuing bank. The card is then presented to the merchants as payment for the services or products.

2. Service Provider: Service provider is the business that is engaged in the sale of services or products. It can also be said that it is a business that allows accepting credit as well debit cards.

3. Bank of the service provider: It is often referred as an acquiring bank. This is because it creates and maintains accounts and enables businesses to accept credit and debit cards. Moreover, these banks provide software and tools to accept promotional materials, cards and other important elements needed in card acceptance to the merchants.

4. Issuing Bank: An issuing bank provides credit cards to the customers. It is important to know that this bank is a member of the card associations. These banks pay the banks for the sales or purchases made by their cardholders. Repaying the issuing bank as per the norms of card agreement is the responsibility of the cardholder.

5. Card Associations: As MasterCard and Visa are not banks, they serve as a guardian and clearing house for their card brand. In addition, they monitor the community of ISOs, MSPs and financial institutions that work jointly to support credit card processing and electronic payments.

This was all about the important parameters of credit card processing. To keep transparency in the credit card processing mechanism, keeping these important points in mind is quite helpful.

Tax Lien: What Is It and How Does It Affect My Credit?

Tax Lien: What Is It and How Does It Affect My Credit?

Tax Lien: What Is It and How Does It Affect My Credit?

Your credit report might contain more information than you think. Other than the details such as hard inquiries, credit accounts, and personal information, your credit report might include derogatory marks like bankruptcies and tax liens.

The reason why tax liens are included in a credit report is because if you do not pay taxes, it might suggest to the creditors that you will also have trouble paying bills. Tax liens could have a negative effect on your credit score, so it is something that you should address as soon as possible.

Tax Lien – An Overview

Tax liens are a legal claim of a local, state or federal government against any and every asset of a taxpayer who failed to pay tax debts. If you have failed to pay federal tax debts, IRS may place tax liens on your property. IRS basically files a public document to inform the creditors that the government has legal rights to your property.

It’s bad news for you. In fact, its implications may be far-reaching. For instance, if you have federal tax liens on your home, it means that you will need to satisfy liens before you could complete a sale or refinance. A good way to eliminate tax liens is simple and you only need to pay your tax debts.

Tax Lien – How Does It Impact Your Credit?

Typically, even if paid tax liens are better than the ones left unpaid, both actually have the potential to affect your credit negatively. The impact on scores will vary on some factors such as the tax lien’s age, credit scoring model, and some details regarding tax liens.

Generally, the older the debt and the smaller amount owed, the lesser tax liens will impact the scores. Yet, although the impact on your credit scores is not big, tax liens might affect your credit in some ways. Lenders may review credit reports and see tax lien before approving applications, so it could inhibit one’s ability to be qualified for financing. Several mortgage lenders would need you to satisfy liens before closing mortgage.

How Long Tax Liens Stay on Credit Reports?

Unpaid tax liens will usually remain on credit reports for ten years from the day it was filed. When tax liens have been paid, it’ll remain on credit report for 7 years from the day of payment. If paid liens are still on your credit report, ensure that they are listed as paid.

Conclusion

To avoid tax liens, you should pay the full amount of tax when demanded. If it is not possible, you might be eligible to consider state or federal programs to pay off the tax bills in the long run while avoiding tax liens. Eliminating tax liens from credit reports might not result in immediate or big improvement to your credit score. If you have some derogatory marks that drag down your credit scores, you would want to address them as well. To see huge improvements to your credit, you might want to add positive, new information to your credit report. It can be done through practicing healthy financial habits like keeping your credit account balance low and making payments on time.

The post Tax Lien: What Is It and How Does It Affect My Credit? appeared first on Creditmergency.

How to file a claim over Equifax’s data breach

How to file a claim over Equifax’s data breach

If you’re one of the 147 million-plus people who had their data exposed by Equifax’s massive 2017 data breach, you can file a claim for cash or free credit monitoring, courtesy of Equifax’s recent settlement with the Federal Trade Commission.

Details: If you lost up to $500 from the Equifax breach, filing for a “time spent” cash payment requires the least amount of paperwork and supporting documents. The deadline for all claims is January 22, per the FTC, and benefits will not be sent until January 23 at the earliest.

Where to start: Check if your information was exposed. Then you can submit a claim online, print a copy and mail it, or have a hard copy form mailed to you. Claims for people who were minors on May 13, 2017 can only be sent via mail.

Option 1:

You have the choice between free credit monitoring — from Equifax, Experian, and TransUnion — for at least 4 years, or a $125 cash payment. In lieu of the $125, you can also opt-in for up to 6 additional years of free credit monitoring through Equifax only.

  • 4 years of credit monitoring from Equifax, Experian, and TransUnion via their separate monthly subscription services is a $2,842.72 value.
  • That said, credit monitoring is not the only way to protect your personal information.

Option 2:

If you file for a “time spent” cash payment — because you spent time trying to recover from or avoid fraud or identity theft — you have to log an explanation of that time spent, the approximate month and year, and the hours and minutes spent. You only have to attach supporting documents if you log more than 10 hours.

  • You can be compensated $25 per hour for up to 20 hours — so the most you can be reimbursed is $500.
  • If you log more than 10 hours, you’ll also have to provide “reasonable documentation of fraud, identity theft, or other alleged misuse of your personal information fairly traceable to the data breach (i.e., letter from IRS or bank or police report).”
  • Your “time spent” here can’t relate to other data breaches.

Option 3:

You can get up to $20,000 if you lost or spent money trying to prevent or recover from fraud or identity theft caused by the data breach and have not been reimbursed.

  • There are 6 categories of financial losses that qualify under this option:
    • (1) costs for freezing/unfreezing your credit report
    • (2) credit monitoring and identity theft protection purchases
    • (3) costs incurred for an Equifax credit or identity theft monitoring products
    • (4) professional fees paid to address identity theft
    • (5) expenses related to the breach like notary, fax, postage, copying, mileage, etc.
    • and (6), the most general category — costs, expenses, or losses due to identity theft, fraud, or misuse of your personal information on or after May 13, 2017.
  • For each category, you have to document the amount of money spent or lost, provide the date, write a description and attach supporting documents.
  • If you spent or lost money for each category several times, add up the money you lost or spent and give your best estimate on the date.

Don’t forget: There are other free or low-cost ways to monitor your credit. Some of the best ways to protect your personal information are to review your credit report, set up fraud alert, frequently change passwords, file taxes early, or consider a security or credit freeze, according to the Consumer Financial Protection Bureau.

The post How to file a claim over Equifax’s data breach appeared first on The CreditPros.

How to Use Your Credit Card Smartly?

Gone are the days when only a handful of people used these Cards. The present scenario narrates a different story and every individual today swipes his or her Credit Cards for making purchases. Executing transactions through these cards have become a common affair. Take a look around, and you will come across innumerable people swiping their respective cards. It’s here that individuals consider the positive impacts of using these cards.

Possibilities of rewards

When it boils down to making effective financial transactions, Credit Cards play a crucial role. This particular mode of payment can be useful, effective, and rewarding if the users know the art of using it. Try utilizing your card smartly, thus reaping the maximum benefit out of it. Here are some tips to help you out:

Tips to make the most of these Cards

If you are wondering about how to use your credit card, following the effective and smart tips will surely help you out. Seeking professional assistance will be the best thing to do, as that will help you spend smartly and earn more. Always try to strategize your expenses and spending behavior for smarter and better transactions. If you wish to make the most of your transactions, these suggestions can be useful:

1. Higher Credit Limits

While accepting Cards from a bank, you must check the credit and spending limits. Always look for highest limits, as that will help you emerge as qualified creditors. You will not only gain the flexibility to plan high-priced purchases but also get the opportunity to prove your credit worthiness.

2. Paying bills on time

Overdue amounts and card bills can affect your credit score negatively. If you fail to pay the overdue amount within stipulated periods, make sure you have adequate finances to pay off the pending amounts. It’s highly imperative to pay overdue on time, as that is the key to getting qualified for higher credits.

3. Understand rewards

Most of the individuals receive special gifts on their cards. However, they fail to understand the ways to use them. You should comprehend the clauses, understand them, and then redeem special discounts. Every Card owner must know his credit limits as that will give him the freedom to pay.

4. Clear, complete overdue amounts

At times, you might come across an option where minimum overdue can be paid. Steer clear of choosing such options as that won’t help you in any way. Try clearing the complete bill without keeping any pending amount. Minimum payments can lead to exorbitant interest rates on the remaining amounts.

5. Ensure complete security

Always keep your cards in secured places and make sure it is safe. The details related to the Card should be open to you and not to anybody else. Sharing such crucial details will pave the path for fraudulent practices. Be crystal clear about the usage of your card and keep it secure. That’s the key towards making authentic transactions.