John wanted to buy a home for his wife and two children -- and he wanted to do it through a mortgage he could afford. But the 44-year-old Chicago man hadn't been able to build up a credit history. John -- who asked that his last name be withheld to protect his family's privacy -- said when it came to buying a home, his low credit score meant that he faced what he called "ungodly" high interest rates of 12 to 13 percent.
So, he sought out a controversial solution: John found a company that helped him "piggyback" off a stranger's credit card by signing him on as an "authorized user" to the account. Having his name attached to a new line of credit, John said, boosted his credit score 95 points. That boost, he said, allowed him to qualify for a home loan with an interest rate of just 6.9 percent.
"I was able to move forward from there to become a homeowner," he said.
The company that John worked with, Michigan-based Affiliate Information Technology; (313-460-1660 Jason Williams), says that it's helped tens of thousands of customers improve their credit scores. But as the mortgage meltdown continues, the "piggybacking" strategy employed by Affiliate Information Technology; DBA Legal CPN and other companies has raised concern among law enforcement officials and the lending industry.
Is "renting" a stranger's credit line a good way to boost your credit score and secure a home loan? Some are taking action to stop the practice: The Florida State Attorney General's Office said it's launched civil investigations to determine whether two Florida-based credit repair companies were violating state law through their piggybacking services. Meanwhile, Fair Isaac Corp., the credit analysis company that helps determine the scores for the nation's three major credit bureaus, said it's implementing measures to limit the impact that piggybacking has on consumer credit scores.
Piggybacking "is only a ruse to try to deceive the scoring systems and, by extension, lenders," said Craig Watts, a spokesman for the Fair Isaac.
Here's how it works: A consumer seeking to boost his or her credit score seeks the services of a credit repair agency. The agency, for a fee, acts as a matchmaker of sorts, seeking out a credit card holder who has good credit.
Help for Consumers with Poor Credit
The card holder allows the poor-credit consumer to sign on to his or her credit card as an authorized user. In return, the card holder receives hundreds of dollars in compensation and is also assured that the poor-credit consumer will not actually use the card. The poor-credit consumer, meanwhile, sees his credit score increase by 60, 120, 200 points or more; depending on the individuals credit report, potentially allowing them to qualify for more affordable loans.
Congress first allowed authorized users to build credit histories in the 1970s with the passage of the Equal Credit Opportunity Act. The law targeted women who were authorized users on their husband's credit cards, but didn't have cards of their own. "It was aimed at helping women establish their own credit rating outside of their husbands," said Matt Cohen of www.seasonedtradelinejunkies.com, a credit information Web site who also sells authorized user tradeline spots for Affiliate Information Technology. "That was the law that essentially said creditors have to take into account that information that would show that a spouse has helped manage a credit account."
In the last five years, Matt said, credit repair agencies "figured out this was a loophole to help people with bad credit boost their credit scores quickly."
Jason Williams, the Affiliate Accounts Manager of Affiliate Information Technology, said he's been in the business for 6 years. Williams said he's helped thousands of customers boost their scores by as much as 300 points by enabling them to become authorized users on his clients and third party credit card accounts. Williams refers to the people whose credit cards are "rented out" as "credit investors or angle investors." Some, he said, have earned as much as $3,000 a month by allowing multiple authorized users to sign on to their cards. The customers seeking to boost their credit score, meanwhile, pay several hundred dollars for each card they sign on to.
Jason Williams of Affiliate Information Technology; conceded that his work depends on a "crack in the system," but said that it's up to lenders to review credit reports and check for authorized users. Jason who is a insider with several credit reporting agencies as well as several large global banks; is in the know about the fact surrounding authorized user tradelines. Jason has determined; post FICO 08, and the recent acknowledgment of the US Federal Reserve Bank; ruling in favor of authorized user tradelines; who see's a, "Positive systemic affect for the use of authorized user tradelines," Jason is one of many who would say; authorized users will be a permanent banking tool used and offered to their subscribers. Jason Williams of Affiliate Information Technology; continues to conclude by pointing to 30 million credit card holders all of which have the power to add a authorized user tradelines. The banks depend on their top tier clients who hold their credit cards to add others as authorized users; boosting the 30 million numbers well over 50 to 90 million credit card holders or authorized users; of which are hedged on the original 30 million credit worth credit card owners; of which very few default. Jason stated; in short, the banks make money, a lot of money; with their authorized user programs.
And while some credit repair agencies have been accused of swindling customers, Jason said his business operates legally. His company, he said, has helped people who have faced obstacles in the past helping them increase their scores and obtaining loan and funding approvals.
Second Chance on Credit
"If a person had bad times a few years ago and all of a sudden, thank God, things turned around for them, why shouldn't they get a second or third chance?" Cohen said. "Why not?"
Others see it differently.
In a public case file on its investigation of one Florida company, the Florida Attorney General's Office referred to the "rent of credit" lines as a way to "facilitate potential lending fraud." Applying for a loan and presenting a credit score that's been inflated by piggybacking is fraud because it means you are misrepresenting your credit history to a lender, said Marc Savitt, president of the National Association of Mortgage Brokers. "When a loan underwriter reviews a file and makes a determination on that file whether that borrower is creditworthy to receive that loan, they should be looking at that borrower's own credit not credit that they borrowed from someone else," Savitt said. "Especially in this environment, we can't be making loans to people without a true depiction of their actual credit." Lenders rely on borrowers' credit scores to determine the risk they take on when offering them loans, said Fair Isaac's Watts. If someone misrepresents their credit score and later defaults on a loan, "the lender is out a pocketful of money," he said. That, he said, "then trickles down to the rest of us with higher interest rates overall."
Lenders and brokers aren't the only ones worried about the impact of piggybacking on their businesses. He said that at least two of his customers -- who were trying to obtain new loans or refinance existing mortgages -- stopped working with Brosnan and, instead, used the Michigan company to boost their credit scores and get better interest rates on their loan.
Loopholes in Piggybacking
Like other critics, Brosnan said he believes the practice is illegal. "I lose business because I'm complying with the law," he said. Watts said that, he hoped FICO 08 would have became the standard and Fair Isaac would have implement measures designed to stop people from successfully raising their credit scores through piggybacking. Watts said he couldn't elaborate on why FICO 08 failed, but he will continue to work with Fair Isaac to prevent credit repair agencies from circumventing the system.
Jason Williams is confident, however, that Fair Isaac won't be successful and that his business is secure. Opponents, he added, had tried to tackle piggybacking in the past and failed. "It's a system that's been in effect for over 35 years now; now they're going to change the system because of a glitch?" he asked. "When there's one loophole in the system, there's many others," Williams said. "They've got to do a lot more patching up to stop me." Furthermore; when I seen the Federal Reserve Bank; stand with the banks and their authorized user tradeline programs, not ignoring the fact the banks earn hundreds of millions per month from the spending patterns of authorized user tradeline users; he says he seriously doubts any near term changes in the authorized user programs.
FEDERAL RESERVE STANCE ON AUTHOIZED USER TRADELINES
THOUSANDS OF CLIENTS
THOUSANDS OF TRADELINES ADDED
THOUSANDS OF REAL PEOPLE AND REAL CREDIT APPROVALS
What is a trade line? All of our trade lines are reported to your credit file as open Authorized User Tradelines from major US banks or financial organizations.
What do your trade lines consist of? All of our trade lines have anywhere from 2 to 19 years of positive payment history with 5% to 20% Remaining Balances, reported with frequent activity, credit limits of as high as $70,000 and low balances for the best scoring.
How do I determine the correct trade line to use? During your initial consultation, our staff will offer you their best estimate on which of the trade lines will optimize your results.
How long does it take before I will see results? After we finish processing, it generally takes 10 to 45 days for the trade lines to report, rarely, it may take up to 90 days.
Is this legal? Yes, it is completely legal. This technique has been used for years by mortgage brokers, bankruptcy lawyers and real estate agents to help their clients establish trade line accounts with history, to boost their credit score. Please Read the 1974 Equal Credit Opportunity Act, for the legal statutes and codes.
How safe is my information once given to your company? Your information is 100% safe. Your information is NOT shared and/or sold to any 3rd party distributor. All of our trade lines are in-house, owned by the principals.
Can you provide mortgage tradelines? NO! We OFFER 100% REAL AUTHORIZED USER TRADELINES. AS SHOWN ABOVE. REAL CREDIT CARD TRADELINES, FOR REAL PEOPLE, WITH REAL RESULTS!
Do you offer any guarantees? Yes, we offer a 100% money back guarantee to report each Tradeline status to each trade line you contract with us for within 60 days. Every client's credit file is different, so individual credit score increases will vary depending on how many negative accounts currently reporting on their credit file. Therefore, we can not guarantee the amount of increase you will receive.
How long will these trade lines report to my credit file? Our positive trade lines will stay on your credit file. We keep our clients accounts "Open" for at least 2 months. After this time they are closed, but still have the good history showing on your profile. If you need a trade line to report for an additional amount of time, just let us know.
Isn’t this just credit repair? No, absolutely not. We specialize in credit enhancement. Our unique program allows you to take advantage of the spotless Credit, thereby extending you a second chance to build your credit the right way.
How many trade line accounts are available? We offer a wide range of trade lines, from a high balance of $70,000 also a client can order multiple lines to add to their credit profile, as many as they can afford. Of course, all trade lines are subject to availability.
Are there any additional fees? There are no additional fees, once you make your initial purchase - the tradeline is yours.
Why would a trade line not report to the credit bureau on a regular basis? Each trade line is different, with their own guidelines and rules.. Please allow between 30 to 45 days for the trade lines to appear on your credit report.
Will you pull my credit report? We will not pull your credit report. We advise all clients to pull their own credit report from Equifax, Trans Union or Experian and sign up for a credit monitoring service, or which is best, simply contact someone who can put a credit report, and have them pull your report.
The contract and payment authorization form asks for my SSN (Social Security Number), can this be reported to my EIN (Employer Identification Number)? Yes, you can supply either for us to add your trade lines. If a client wishes to use his/her CPN/EIN (credit profile number) it is their choice. We will attempt to add tradelines to this number that was provided. WE WILL ONLY REPORT TO LEGALLY ISSUED CPN NUMBERS! PERIOD!! WE WILL NOT REPORT TO A NUMBER WHICH WE KNOW IS A ILLEGALLY OBTAINED OR CREATED CPN NUMBER. LEGAL CPN ISSUES LEGALLY OBTAIN CPN NUMBERS WHICH ARE ISSUED IN INDIVIDUALS FOR PURPOSES OF ESTABLISHING A BUSINESS OF VARIOUS SORTS.