How to Avoid the Seasoned Credit Scam

Here's the premise. You have good credit. Others do not.

The idea is to have those with poor credit borrow your good credit for 60+ days as an authorized user on your credit card, then they could apply for a mortgage and pay lower rate based on your credit.

Are people really gullible enough to fall for this?

I mean really?

The process is actually called "piggybacking" and can be a good way to help raise your credit score, but now matchmaker companies have been popping up which leaves the door wide open for the potential for fraud, incredible company profits and literally, no consumer benefit.

Being dubbed by marketing professionals as the "of the greatest credit building secrets that the credit card companies and credit bureaus do not want you to know about" and "secrets that the credit bureaus are terrified of you finding out about", are they really serious about this line of crap?

Companies are popping up all over the internet with veiled promises of increased credit scores and using credit history that doesn't belong to you. How does this logically sound even remotely like a good idea, much less legal?

You would rightly be wary of considering a family member to be included on your credit reports let alone a perfect stranger, but what is it that makes seemingly intelligent people fall for this new millennium scam?

For those with poor credit, the appeal for this type of service is obvious. For a fee, companies will "match" those with poor credit with those with good. It's not really like a dating service. Rather, it's sort of a "credit sperm bank". A brief, impersonal encounter with long-lasting results.

Results that cost the desperate poor credit rating person upfront fees in excess of $2,000.

But what would possibly prompt someone with good credit and a working set of brains to register for this ridiculous consumer service? What's the appeal for them?

The marketing aimed at these good credit Samaritans make claims that they can earn up o $10,000 a month or more. They advertise that for each authorized user you add to your credit card, you are paid between $100 and $150. The exact amount is not divulged until they see your credit.

If you decide to sign up for this insane idea of "sharing your good credit," you're not getting paid nearly as much as the company collects from the person who wants to borrow your credit. Also, how many authorized users do you need, even at $150 per, to earn up to the $10,000 per month that these companies promise?

The marketing campaigns of these companies state that it is a legal and ethical way for consumers to increase their credit scores. Some lenders and real-estate experts question the propriety of the authorized user strategy, since it's designed to mislead banks about a person's creditworthiness. The sites are a commercial twist on what some parents have long been doing for years, giving, young adults with no credit or poor credit a leg up in the financial world. The difference is the authorized users usually get cards and can charge against the accounts. Under these anonymous programs they cannot. These programs are strictly meant to improve a person's credit report.

The Fair Isaac Corporation,the company that developed the FICO scoring method, occasionally gets questions from lenders who similarly worry that authorized users will manipulate their scores to snag lower interest rates or larger loans than they deserve. Fair Isaac weighs an authorized user account the same as any other credit card account.

Meanwhile, lenders have incentives to make it easy for cardholders to add additional people to their accounts. If the users actually use the accounts to make purchases that could boost balances on which lenders collect interest. Lenders also see a chance to woo new customers, since authorized users are often young adults getting their first chance to use a card.

My suggestion to consumers is that if you can get a family member to help you by "piggybacking" well, the only question then would be a legal and ethical one. No matter how you cut it, it still appears that you are trying to fraudulently make your credit rating be something that it's not.

But the way the credit bureaus and credit card companies treat consumers with their questionable practices, perhaps giving them a dose of their own medicine is what they deserve, but as my 89 year old mother has told me since I was a young Debtonator, two wrongs never make a right.