A common question we get here at Mckenzie is, “are tradelines legal?” We have allocated extensive resources to ensuring we have the correct answer regarding the legality of “credit piggybacking.”
The reader’s digest version is yes, the act of being added as an authorized user to someone’s credit card is legal and is protected by the provisions in the Equal Credit Opportunity Act of 1974 – Regulation B. Although it is legal, it’s usually considered a disliked practice by society, credit bureaus, and lenders.
The practice of renting credit tradelines, also known as “credit piggybacking” consists of adding an individual with a low credit score as an authorized user to a credit card of an individual with a high credit score. The process tends to improve the credit score of the individual with the low credit score due to the incorporation of the credit history of the highly rated profile on subsequent credit reports of the lower-rated profile. The practice has been in widespread use for at least the past twenty years, and at a time attracted significant scrutiny from Federal Regulators and the creators of the credit “FICO” Score, the Fair Isaac Corporation.
In 2008, due to what it called “widespread abuse” of authorized user status on credit accounts, the Fair Isaac Corporation considered amending the FICO scoring methodology to exclude authorized user history as a factor in credit scoring. However, the proposed amendment was abandoned as it was determined to be illegal to exclude authorized user information from credit reports under the 1974 Equal Credit Opportunity Act. Thus, FICO has reluctantly continued to use authorized user information in calculating credit scores, and the practice of tradeline renting has continued without interruption or apparent further scrutiny from the Fair Isaac Corporation or Credit Reporting Agencies.
As it stands, the practice of adding authorized user tradelines to your credit report and paying to do so is perfectly legal.
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