If you’re among the millions of Americans trying to boost their credit score, then the idea of piggybacking on someone else’s higher credit score might be tempting. If you have a spouse or family member with a good credit history who’s willing to add you to their credit card as an authorized user, that’s a legitimate way to improve your score. As long as they continue making timely payments, you’ll both reap the benefits on your credit reports.
But not everyone has that option. An alternative popped up about seven years ago when credit repair companies realized that while removing negative information from consumers’ credit reports is time-consuming, adding positive information is a simpler way to boost someone’s score. This alternative, called tradeline renting, pairs credit-challenged consumers with creditworthy consumers willing to add a stranger as an authorized user in exchange for money.
Tradeline renting websites offer an “inventory of credit cards with different ages and credit limits and variable pricing based on the quality of the card that you want to be added to,” explains John Ulzheimer, Credit Expert for Credit Sesame.
In response to this practice, FICO initially threatened to eliminate authorized user tradelines altogether. Instead, they built some logic into FICO 8 that discounts the impact of illegitimate authorized users. “They understand when it’s a husband and wife or parent and child versus a complete stranger in Michigan and a compete stranger in Kansas,” says Ulzheimer. “But that’s not the version that most lenders are using, so there definitely is a window of opportunity for tradeline renting to be effective.”
Although he admits that tradeline renting can boost a consumer’s credit score and save them money on a mortgage or car loan, Ulzheimer doesn’t recommend this strategy. “Some people would consider that to be bank fraud, meaning that you knowingly deceived the bank by lying about your assets,” he says. (In fact, Transunion published a whitepaper calling this practice authorized user abuse.) Also, if the cardholder stops making timely payments, it could wipe out the positive history you were trying to create.
Renting out your tradeline to credit-challenged consumers isn’t much better. “You’re definitely facilitating and enabling the process,” says Ulzheimer. “You know what you’re doing and you’re getting paid to do it. You may not have pulled the trigger but you’re definitely involved.”
For those with a low credit score due to an issue like bankruptcy or a collections account, the best antidote is time. “Eventually [the strikes against you] will age and it will fall off [your credit report],” says Ulzheimer. “That takes a long time and a lot of people don’t have the patience, but I would rather sleep well tonight knowing I rebuilt my credit score legitimately.”