'Piggybacking' Your Way to Better Credit?

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?" Mansour 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."

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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 envionrment, 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. John Brosnan, a foreclosure counselor in Nevada, is suing a California-based company that offers piggybacking services.

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 California company to boost their credit scores and get better interest rates on their loan.