The desire to earn better credit is not only understandable, it is also incredibly smart. The condition of your credit will have a big influence over your financial life.
Want to purchase a home or vehicle? Your 3 credit reports and scores play a big role in your ability to qualify for a loan and help determine the rate you will be offered if you are approved. Applying for a new job or promotion? Your credit reports might play a role again. In fact, the condition of your credit could be considered whenever you take out insurance coverage, open a new mobile phone account, and in many more situations than you probably ever believed possible.
Hopefully you already understand the importance of earning good credit and you are working to try to repair the damage from any past credit problems you may have encountered. Yet the truth is that the road back to healthier credit is not always a quick journey.
You can certainly do things to potentially help speed the process along such as establishing new, positive accounts and monitoring your three credit reports and scores closely. Even so, it may require a little patience and discipline on your part before you can expect to earn good credit again.
Because credit is so important and because improving your credit can sometimes be a slow and tedious process, you may find yourself tempted to take a few shortcuts along the way. The temptation is understandable, but taking shortcuts to try to improve your credit can actually be quite dangerous.
One such shortcut which you should avoid at all costs is known as tradeline renting.
There is no question that being added onto someone else’s credit card account as an authorized user has the potential to help your credit scores. If a loved one adds you onto an existing, well managed credit card account (no late payments, low or $0 balance) the impact upon your personal credit scores might be very positive, once the account shows up on your credit reports. If the account has been opened for a while (aka it is “seasoned”) and if the credit limit on the account is high then the positive credit score impact might be even more significant.
There is certainly nothing wrong with being added as an authorized user onto a credit card belonging to a friend or family member. As already mentioned, the authorized user strategy can potentially be a very effective step toward building or rebuilding your credit. If you are considering gaming the system by renting or “piggyback” on a stranger’s credit card account as an authorized user, however, you could possibly find yourself in hot water, legally speaking.
The Danger of the Tradeline Rental Scam
The tradeline renting scam comes in a few different flavors. Typically it is a service which is facilitated by a broker or a middle man who, for a sizeable fee, will connect you with a stranger who has older or seasoned credit card accounts which are in good standing. Once you pay your fee, the stranger adds you onto their credit card account as an authorized user. The middle man pays the stranger with good credit a small portion of the fee collected from you and then puts the remainder in his own pocket.
It is arguable whether or not the practice itself of paying a stranger to add you as an authorized user is illegal. Some think yes, others think no. However, if you apply for any new loans after paying to be added to a stranger’s credit card account then there is no question that you could run the risk of being charged with bank fraud. (Plus if you applied for your new loan over the phone or via mail, you may risk being charged with mail fraud or wire fraud to boot.)
Additionally, FICO’s newer credit scoring systems have logic designed to detect piggybacking scams. As a result, even if you pay to be added onto a stranger’s account, you might receive no benefit from the tradeline whenever a lender pulls your credit scores. With so many legitimate means of repairing poor credit, it simply is not worth the risk of renting a tradeline in an attempt to speed up the process.