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Piggybacking

Definition: Piggybacking

Piggybacking is the practice of adding someone with poor or no credit as an authorized user on a credit card belonging to a person with excellent credit. There are two types of piggybacking, one involves strangers and the other involves family members.

The practice of one stranger piggybacking on another stranger's credit has FICO in a rage. Certain online businesses are profitable by playing the system: They earn their fees by finding consumers with good credit to take on those with bad credit. The bad-credit consumers pay the company a hefty fee, and the company pays the good credit consumers a much smaller fee.

Many parents use piggybacking as a way to build credit for their children. By adding them as authorized users to one or more cards, the parents' credit history for the particular card appears on the child's credit report. The child is able to build a healthy credit history without even having her own credit card. When it comes time for her to apply for her own card or rent an apartment, chances are she won't need a cosigner because of her established credit history.

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