Credit card “piggybacking” isn’t a new practice. For years, parents have done it to help their children get a jump start on their credit. However, it recently came under scrutiny because shady credit repair companies and unscrupulous consumers used the practice to artificially boost bad credit scores.
What is Credit Card Piggybacking? Credit card piggybacking is much like the childhood game of being carried around on someone else’s back; but instead, you’re “carried” on someone else’s credit card account. Once you’re added as either a joint card holder or an authorized user to a credit card account, the entire credit history typically appears on your credit report and included in your credit score.
Being a joint card holder or an authorized user on an account with a positive payment history would boost your score. While late payments and high credit card balances could lower your score depending on the other information on your credit report. Note that not all credit card companies report authorized user accounts to credit bureaus, partly because of the cost and partly because of the way the practice has been abused by some.
It’s easy to ignore the problems that are created by a low credit rating. Thinking about your credit history isn’t something many people do every day. At some point it will become obvious that the poor credit score is stopping you from moving forward. For most, the moment of understanding comes when it is time to make a big purchase, like purchase a home or a car.
Having a bad credit score makes it very hard to obtain a loan. Even if your score is somewhat decent and you can get approved, your will likely pay much higher interest rates. It may not seem like an additional 2% in interest will result in much, until you do the math. A mere 2% higher interest rate will result in thousands of extra dollars spent.
The first thing that you need to do in order to begin raising your score is to pull copies of your credit files and scores. You can do that by visiting Credit Viper.
As an adult almost everything you do revolves around your credit. Your ability to purchase a home, a car, a big screen TV. It also affects your insurance rates, renting your apartment and even getting a job. Heck, besides marrying my wife for her sheer inner and outer beauty, the next biggest thing that attracted me to her was her credit. YES, that’s right!!! It was that important she handled her finances how I did and was one of the first questions I asked her. We laugh about it now but it caused a definite stir in the beginning. So lets talk about credit.
First there are 5 things that are factored into the algorithm used to calculate credit. They are:
* Payment history
* Amounts owed
* Length of credit history
* New credit
* Type of credit used
Everyone knows what a FICO score is. If you’re a business owner you better know what a Paydex score is and why it’s important these days. Paydex is the equivalent of a consumers FICO score. It measures your businesses credit worthiness and is being looked at more and more by lenders.
Business credit agencies use this business scoring system to determine the credit rating of small businesses. Dun & Bradstreet and Experian are two of the larger ones. You can simply sign up at www.dnb.com. You will be assigned a number and then it’s up to you to build your credit in a similar fashion as you would your FICO score.
Paydex scores range from 0 to 100. Anything 80 and above is good and where you must be in order to obtain business financing. Below 80, and just like a FICO score, you can have problems.