The Credit Bureaus are working to kill the Piggybacking method of credit repair by modifying the FICO Scoring model.

People shouldn't really be surprised by this move by the credit bureaus to eliminate this method of credit restoration since it has become almost a fad in helping people build good credit within the industry.  If you are unfamiliar with what piggybacking is within the credit world, let me explain.

Let's say you are someone who has little to no credit and you wanted a quick way to build credit so that you could begin getting loans or credit cards with high credit limits.  The quickest way to build this kind of credit history is to do what is called piggybacking where you basically rent someone else's high credit score.  There are credit repair companies who contract with individuals who have high credit scores, typically with FICA scores in the 750 to 800+ range, who are willing to rent out there high scoring credit score by allowing an individual to be placed on their high limit credit card as an authorized user of the card. 

This placement on someone's credit card as an authorized user is done for a fee which the credit repair company then pays the credit renter a fee for allowing the authorized user to be placed on their card.  So for example the credit repair company would find an individual with a high credit score, pay them $200 to allow them to place an authorized user on one of their credit cards for a month.  The credit repair company would then charge an individual who needs credit a fee of $1500 to $2000 dollars for this authorized placement and would almost immediately gain a huge boost in their credit score because the authorized user would now be shown as having this new credit account on their credit report. 

No personal information is ever exchanged between the two parties and the credit repair company handles all the personal data between the parties so it is completely anonymous in nature.  The authorized user is never given information about the account itself so there is no risk of the authorized user charging up items to this credit card.  This entire process is what is referred to as Piggybacking.  

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This process has become so widespread these days that it has caused quite a stir in the banking and credit bureau realms, so much so that the credit bureaus have devised a 12 month plan to eliminate this method from affecting someone's FICO score.  They've done this by changing how authorized users get scored through the FICO scoring model and was put into motion this last September.  This new FICO scoring model is being pushed into the banking and lending industry as we speak and should be in full force by September of 2008.  It would most likely taken much longer for this implementation to take place but the banking industry itself is slow in adopting new scoring models and takes some time for them to begin using them.

Keep in mind that this method of Piggybacking won't affect joint account holders such as husband's and wives, since in most cases they have joint accounts.  This new change could be devastating for students however, who are put on their parents cards strictly as authorized users and could see a major drop in their credit scores because of this new scoring model. 

One could argue that this method of credit repair or credit building does pose a big problem with the lending industry since there is no way to differentiate between a student trying to build credit and someone who is a real credit risk suddenly getting a major boost in credit, that simply cannot afford the purchase of a $500,000 house, yet prior to the piggybacking could only qualify for a $100,000 dollar home loan.

What I find to be even more disturbing is that the credit bureaus have the capability to mess with the scoring model on a whim and have even devised their own scoring model called VantageScore.  We will be taking a look at this new scoring model and give you inside information on it's purpose and how it may affect your personal credit.