'Piggybacking' Your Way to Better 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 10, 20, 30 points or more, potentially allowing him to qualify for more affordable loans.

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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 Gerri Detwiler of Credit.com, a credit information Web site. "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, Detwiler said, credit repair agencies "figured out this was a loophole to help people with bad credit boost their credit scores quickly."

Edwin Mansour, the chief executive officer of Tradeline Masters, said he's been in the business for 10 years. Mansour said he's helped customers boost their scores by as much as 300 points by enabling them to become authorized users on other people's credit cards.

Mansour refers to the people whose credit cards are "rented out" as "credit investors." Some, he said, have earned as much as $5,000 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.

Mansour 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.

And while some credit repair agencies have been accused of swindling customers, Mansour said his business operates legally. His company, he said, has helped people who have faced obstacles in the past.