You have bad credit. You want to buy a house. Why bother with such old-fashioned ideas like paying off debts and slowly building back your credit? You want that McMansion now! All those other sub-prime defaults are just crimping your style. Well, now you can simply buy good credit! Or more accurately, rent it.
It’s been a well-known practice for parents add to their kids as authorized users on their credit card accounts. Besides letting them buy textbooks, this can boost their credit scores because that larger and long-standing credit line will show up on their borrowing history as if it were theirs. Now add three critical facts:
1. Authorized users don’t have to be related to you.
2. There is no limit on how many authorized users you can.
3. There is no law against the rental or sale of authorized-user designations.
You see where this is going? From a recent Washington Post article titled Credit Scores for Sale:
Exploiting that loophole, numerous companies have popped up on the Internet offering to buy and rent out the credit card “trade lines,” or accounts, of credit card holders with high limits and perfect payment histories.
The person seeking a higher credit score does not obtain access to the credit card. Within 30 to 90 days of being added to the account, the national credit bureaus incorporate the primary cardholder’s ongoing account information into the files of the authorized user. The score-raising attributes of the primary cardholder’s stellar payment record then flow through to the new user.
One example site mentioned is AddaTradeLine.com. The site screams shady. Still, I wanted to see how much my “seasoned” credit lines were worth.
2) How much will I get paid?
The amount varies, and it depends on the age of the card, and the credit limit. We pay the most for old cards (30-40 years old) and high limits (100k or more) We do pay for any cards you have with a limit of at least 1k, and at least 6 months old. If the card is less than 6 months old, but has a credit limit of $5,000 or more, we can rent that as well. We are currently offering 25% payout on what our customers pay. Based on our current pricing, you would receive anywhere from $125 to $625 per transaction. To get paid at the higher tiers, you need to have a more attractive credit card account. An example would be a 30 year old Visa card with a reported limit of $150,000. A typical example of an $125 tradeline payout would be one 3months old, with a limit of $7,500.
They report people adding upwards of a hundred authorized users per card on a desirable credit line! That’s over $10,000, with no direct hit to your credit score.
But is this really safe? (Let me put on my evil thinking-cap.) If you add a stranger as an authorized user, they can get your credit card number from their credit reports (some have them partially blocked out, but not my old Transunion one). Since you’re having the extra card sent to your own home, your address may even show up on their credit reports as an alternate address. If they do a reverse phone book lookup on that address, they would have your name. So now they have your name, address, and credit card number. There are a very finite amount of possible expiration dates. And they are an authorized user. Hmm… even with ethical considerations aside, this doesn’t seem like a good idea. Thanks to Nathan for the tip.
Besides, I already profit from my good credit score by sacrificing a bit of it to borrow money for free and earn interest off it.
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Per the Washington Post article, it looks like the FTC will shut these guys down. It is an interesting loophole, though.
I’m sure they will try, but I don’t think they will make it illegal for a person to add an a non-relative (i.e. girlfriend, partner…) as a authorized user. They’ll probably just make it illegal to do it in exchange for money, which would be a very hard thing to track unless you’re adding 100 users.
I’m curious though… A has a great credit history, and B doesn’t. From this article, I get that if A adds B as an authorized user, it’s good for B. OK. 2 questions:
1) If as an authorized user on A’s account, B now prcoeeds to trash his/her credit. Of course, B’s credit will further suffer. But will A’s too?
2) What if we did it the other way around — B adds A as an authorized user. But B’s score is less than A’s. When B’s history flows on to A’s account, will A’s score SUFFER as a result?
1) No, B’s credit has no effect on A’s credit – unless B charges a whole bunch of stuff on A’s credit cards, which he should not have access to in this scenario. (see my evil thoughts for a possible bad scenario)
When you add a authorized user, you are really just adding a clone of your credit line to another person’s credit history. Your own credit history remains the same.
2) If B’s line of credit is crap (late payments, high balances), then yes, this would flow to A.
I’ve actually asked my mom to take me off as an authorized user before because her balance were high for a while on that card and it hurt my credit score. I didn’t even remember that I was still on there.
My fiance just got a new credit card… her only credit card for that matter to help with going a little over budget on our wedding next month. When she signed up the woman asked if she wanted to add an authorized user and she thought “sure, Ill just add Dave” – thinking that she was authorizing me to make inquiries or account maintenance with her account. Then, a week later, a new credit card shows up in my name. My fiance swears she never gave the lady my social security number.
A. Could they have added me without a ssn?
B. If she adds me as an authorized user will that show up as a new credit line on my report and hurt my score?
C. My credit has always been better than hers – if I’m an authorized user on her account, won’t that hurt me?
If any of these negative situations can be true, how can I fix it??
Please help!
When I called to add my wife as an authorized user, they did not ask for any of her personal info (ssn, bday, whatever). They either don’t care who actually charges the card or have the info already.
@Jonathan
Thanks for the info!
@Mossy & David
That’s really very interesting… I wonder:
1) How they can uniquely identify someone by just their name (isn’t that what an SSN is for..?), and
2) If I had bad credit, I could use this technique to sabotage someone else by just knowing their name!!! Scary!
“Authorized user: George Bush”
Wouldn’t that be something….
Clearly, if one wished to rent one’s good credit to another, it would be most efficient and would minimize the risk inherrant in trusting addatradeline.come types to keep annoymous one’s information guarded by simplying negotiating directly with prospective ‘credit tenants’. While the implications might make some uneasy to directly approach colleagues, friends, etc., with such offers, it remains a clever loophole and, as such, I must respect- at least on a theoretical level- its cunning, out-of-the-box manipulation of the parameters of the system.
Personally, I wouldn’t trust addatrade.com, though I believe it is my right to sell my duly acquired assets on my own terms, even if they be nebulous concepts such as ‘credit’….
For a hilarious example of how mischievous one could be by adding an authorized user, check this out:
http://www.zug.com/pranks/credit/mj-credit-card/
I follow your blog frequently as a lurker. I feel compelled to speak out on this post. This is by far one of the worst, scariest and absurd suggestions you have ever offered.
This is EXTREMELY risky behaviour to get into. Identity theft can be easily facilitated.
Rather than focusing on how to make money on hairbrained schemes like this people should focus more on protecting what that have, saving, allocating assets properly, and earning an honest living.
Anyone who thinks this is a reasonable method to put coin in their pocket is an idiot.
I like your blog entries for the most part, but you seem to find quite a number of crazy high risk schemes that you then publish here. I think you should focus less on such things, and put more effort into less hairbrained get rich quick schemes.
This strikes me as a very risky idea. If you’re adding someone as an authorized user, then you’re authorizing them to make charges on you account. The fact that they don’t have a physical card is, as Jonathan pointed out, pretty easy to work around.
David Rocci: the new line of credit on your history may ding it down a bit.. since it’ll bring down the average age of all your credit, other than that.. unless that card starts accumulating late payments, your credit will be fine. remember, you’re only added on in one of her card, it won’t automatically transfer her entire credit history onto yours.
you can simply do what Jonathan did and request your fiancee’s card issuer to remove you as an authorizer user. the account should disappear on your report. if not, you can simply dispute the information as incorrect, that you’re no longer an authorizer user on that account.
In either case, this is a bad bad idea imo. Even if they don’t have your card’s number via the credit report (as some do block it out), they can easily call the card issuer and request for a new card because they lost the card. Oh, and send it to this address now since I’ve moved out that house for school/work/ripping people off.
They’re an authorizer user. Regardless if they have the physical card or not, whatever they do to the account, you’re legally responsible for them. Just as a parent would to an authorizer child user.
I’ve thought about stuff like this before, and I suppose I can make some easy money from some of my better revolving accounts.. but eh, too risky.
You can add your dog as an authorized user if you wanted. Most allow you to specify SSN, if I recall. My opinion is that if your authorized user also lives at your address, and the credit bureaus can get a good match, they will link the two together.
Otherwise, if you just add Michael Jackson or John Smith without giving SSN, there’s too many of those to be just assigning credit lines to the first one they see. Again, just my opinion.
Chris – I’m just bringing up the existence of an amusing option, and then I expressed my opinion on it. From that, people can make their own decisions.
If anyone’s getting the idea that I am a proponent of this idea, please re-read the post more carefully. Do you think the Washington Post is promoting the renting of credit scores?
To be clear and to repeat my words above – “Hmm? even with ethical considerations aside, this doesn?t seem like a good idea.” Also note the dripping sarcasm in first sentence. 😛
Wow. If there is a way to make a buck out there, people will find it. My guess, is 99% of the people paying to use someone else’s credit score are using it to obtain fraudulent credit cards. They will get a card under an assumed name, order gobs of products, and sell them for a quick profit. Who gets the bill? Everyone that has a credit card. Well, not me, because I don’t carry a balance… but it’s things like this that keep rates high. (That an the insatiable greed from the credit card companies and people’s unwillingness to live within their means.)
I agree, this is a very bad idea. But it’s an interesting read!
Can u send me email so I can use my dog?
In essence, this is a credit repair (legal for now) scam. Supposedly, these are temporary credit boosting tools that are primarily being marketing at mortgage brokers, so their clients with poor credit will be more able to qualify for mortgage loans due to the subprime implosion. In turn, the mortgage brokers get their commission.
I don’t how better credit would help people obtain fraudulent credit cards under other people’s names… I suppose they could used to get bigger credit card limits for themselves, which they might eventually default on.
What a risky idea. I do not have any credit cards now nor will I have any in the future — (BTW- I am a 46 yr old saving to build that retirement dream home in 5 years or so — how am I paying for it — since I do not have a credit score — CASH!!) One of the bigest myths in the financial world today is that you have to have a good credit score — the FICO score is an measure of debt– how much you have, and how you have been paying on that debt — I do not have any debt (I don’t borrow money) and have no FICO score.
Dear JC,
You seem to equate having a FICO score and having debt, however, one does not imply, nor does it require the other. I have a FICO of 779 and $0 in debt (nor have I EVER paid a finance charge)- I merely use my credit card as a free 30-day cash float. A high FICO in my case measures not debt, but rather credit worthiness. Congrats, though, on making a major purchase with cash; this is, as always, admirable.
Nathan in new mexico
Nathan,
You are perhaps the exception and not the rule. I like you have no debt (car loans, mortgage, etc.). Amazing thing not having debt; I have this stuff left over each month after all bills are paid — $$$$$
🙂
J.C. People paying their credit cards in full each month is pretty common. Google “The truth about credit card debt” and read that article.
FYI, FICO is also used for home and auto insurance, so responsible use of credit also lowers your insurance payments too.
Markh:
During 1991 to 2001, the credit-card default rate doubled to nearly 7%, according to an analysis of 37 credit-card portfolios by Standard and Poor’s Corp.
Categories: Credit Card,Delinquency
Reporting Pub: Wall Street Journal
Reporting Date: 8/21/2002
Article Title: Credit Card Scrutiny Hits Lenders and Threats to Damp Spending
Article Author: Carrick Mollenkamp
Pub’s Source: Standard and Poor’s Inc.
Source URL:
Evidently these people aren’t paying their credit cards in full each month (and I would imagine their holy FICO scores are trashed as well).
U.S. Consumer Debt
U.S. consumer debt recently reached $2.2 trillion, double what it was about a decade ago. According to the Federal Reserve Board, the debt topped the $1 trillion mark for the first time in December 1994.
Categories: Consumer Debt
Reporting Pub: Des Moines Business Record
Reporting Date: 12/4/2005
Article Title: How much debt can we afford?
Article Author: Our View
Pub’s Source: Federal Reserve Board
Source URL: View details from source
What’s your point JC? I was mearly pointing out that there are many people who handle credit responsibly (ie nathan is not an exception to the rule).
Consumer debt: taking population growth, inflation, and very low intrest rates of a few years ago, doubling of consumer debt is not suprising.
Foreclosure rates rose in 47 states in March, according to Foreclosure.com, an online foreclosure listing service.
State and federal regulators place much of the blame for the foreclosure problem at the feet of mortgage brokers and bankers, who have crafted ever-riskier ways for Americans with poor credit to buy homes. Interest-only and adjustable-rate mortgages account for 63 percent of new mortgages.
According to CNNMoney, consumer spending accounts for some 70 percent of the US gross domestic product. ?So the world economy is leveraged to the US consumer. And the US consumer is leveraged to the hilt,? states the web site.
Experts warn that the debt bubble potentially dwarfs the US stock market asset bubble that burst in 2000. Consumer credit and mortgage debt represent a higher percentage of disposable income than ever before. Household debt as a percentage of assets reached the historic high of 22.6 percent in the first quarter of 2003. The Federal Reserve revealed that personal savings dropped to a mere 2 percent of after-tax income in the first half of 2003.
The point is that while there are some that handle debt (CC’s) responsibly, there is an abundance of evidence to indicate that the majority of Americans do not handle their money/debt well.
Ok guys …. I was searching web by google b/c I am trying to acquire a credit line or loan. And saw this blog. You def. seem to know what you are talking about. OK here goes I am a stay at home mother of 2 and my husband is a Sheriffs Deputy. I am simply NOT trying to live out of my means, but only to acquire some sort of credit so that we can move into our own home. Instead of putting the money to the wind in rent like we have been these last 5 years. We paid off our truck never being late… etc.. but purchased ( again no credit history or co-signer) from a local dealership. They did not report. We have no negatives on or Experian etc. reports. But Unfortunately we have no fico score therefore unable to get any credit lines or loans. Id rather not use a secured card with high interest but little help to my credit with it showing as secured. Any suggestions on getting that Fico so we can get into a home… ( I wish like hell we could use cash but unlike some ,that would be quite impossible) 🙂 Personally I would think that those without debt that have no desire to be in debt.. could better afford the home they are busting there butts to purchase… ohh yes we want a home so we can loose it and be out on our hind ends with our children… even being as poor as we are the last thing I would loose EVER is my home.( my husband in our small town only makes 10.00hr. 🙁 I have my parapro but with the costs of 2 in daycare..and only being able to make min. wage.. well you get the idea..) I have only my bills and they get paid what is the harm in not having any credit as long as you have no bad credit? When especially,we are just trying to get in a home of your own.
Any!!! advise would be greatly appreciated.:)
I hope I am not over stepping by asking a question on your blog.
Thank you Jessica
I thought this was risky 18 months ago and still kinda do, but my friend 1st told me about this. I suffered the ales of poor financial handling in college which left me with a horrible credit score. I have been working to repair my credit ever since because I got a financial education since. Anyway I improved my score by 150 pts since college but the Christmas before last, my friend told me about what he did to improve his credit score he used one of these brokers over the summer and by december he increased his credit score to a 815 from a 620, I was amazed but for some reason my concious wouldn’t let me do it because I felt that some goverment agency would come knocking on my friends door and hall him off to prison. But I been thinking about how it took years of follow up for me to improve my score and it only took months for him and he is in a better position than me credit wise. P.S. I secretly hoped that the feds would come and scold him.
Okay for starters I had my husband added to all of my cards. All I did was call and say I need a card for _____ they said okay. None of his info was required. I even use his income when I apply for a card because I am a homemaker. We never did anything as far as combined credit until we had to get a mini-van. We needed my score and his money, so I was the borrower and he was the co-signer. After that everything got screwed up. Before we knew it stuff that had dropped off my credit report showed up on his and his on mine. There are no Federal Guidelines on the credit reporting agencies, so there are no garantees even if you are a perfect borrower.
Why piggyback someone elses credit. If you’re credit report is bad just pay cash.
@Michael: Because not every one can shell out $20,000 cash for a car, much less $200,000 for a house..?
Any new developments in the world of renting credit? I notice a couple of the websites that were doing this are gone, like AddATradeline.com. Did they get slapped by regulators?
New developments would be nice. I heard about renting your credit score on NPR. A returning soldier used his credit score to pay for his car. I hava a score of 755 (because I pay my bills instead of having a life). Id like to pay off my cards once and for all, get through the large-family holiday gift debt season -particularly nasty as a single person with lots of siblings, neices & nephews- and maybe see what it’s like to have a life, so I thought I’d check this out. Problem is that the only places I found want you to invest in developing real estate usuing your credit (no money), then flip the housing when its completed. Isn’t this how so many people are getting in trouble? I may need the extra income, but I’m not stupid.
re:online savings account. There’s one you forgot to mention: Paypal. Funds deposited to a Paypal account have the option of being in their money market. I’ve had this for over a year, and yeilds have been no lower than 5.05%-5.45%.
? RENTING CREDIT FOR MORTGAGES?
Anyone out there know about these offers or schemes?
Your good credit is used to help secure a property….A years worth of payments are put aside by the company that does this…YOu get a check between 10-15k depending upon the size of the mortgage….the the prooperty is resold/fliped…
The obvious is what happend after 12 months the real estate market isnt exactly in a boom state….also how does this impact my credit score beyond the obvious if the payments do not get made?
is this a scam???
i have bad credit me and my friend went to the bank and got a credit card.he has a score of 700 now even though we got a new card will my score go up.
if you are careful this works. Its purpose to to help people with scores ok but not good enough to get a mortgage so they need 20-40 more pts and get it this way. Clever and easy money but be VERY careful. But it does work.
where can i rent a good credit?
Please let me know how can I rent good credit. I need one a.s.a.p. Thanks.
I was just recently looking through this article, now they are offering money for your credit line in craigslist, I was reading through this comments but no one has ever though that maybe they are trying to get as many credit cards as possible to some day max out all this cards with money taken out and move to a different country, who knows, but is possible, now days anyone can hold a money transaction license, and run all this at the same time, have an escape plan and no one would ever be able to find them. just like people asking for help cashing a winning lotto ticket, who has done something to catch this people, is impossible.
Hi Jonathan, It has been 9 years since you blogged on this topic. Are people still earning money added AU’s to their credit card accounts? Have you ever had any accounts closed by lenders for adding to many AU’s? This is what you don’t hear. There is some risk.
I know that Chase will close your account and has closed accounts for people in these sort of dealings. They do not like people frequently changing AU’s or suspicious behavior surrounding AU’s.
Say one wants cash from their credit card.. So they buy an item for someone, who pays them back a % less in cash. . . . Could this work as a legit business? …Its similar to ‘middleman’ Square Card fees.
Wouldn’t it just require a cash pool for facilitating transactions quickly, and strict oversight to minimize rip-offs?