MYTH – You can’t inherit or piggyback on another’s FICO scores.
FACT – Yes, you can inherit or piggyback a family member with good FICO scores. This is known as an authorized user (AU). You can also inherit credit scores from a family member with bad credit so be aware.
Effective no later than June 8, 2016, a credit reporting agency (CRA) will only report an AU if the birthday of the AU is provided to the CRA by the creditor.
Background: There was a time, recent and short lived that this credit activity was banned by FICO. It did not take long for their scientists to invent a new scoring formula based on Inherited Credit. The reason this activity was banned was due to abuse. Greed driven individuals franchised their credit scores to strangers for predatory fees. This presented a problem for lenders.
With the FICO 08 model (introduced in 2009), inherited credit is now limited to family members related by blood or marriage. For example a mother or father could allow their children to piggyback on their good credit as the offspring establish their own credit. In the converse, a child may piggyback siblings, mom or dad to help them reestablish credit after a catastrophic credit event.
There is virtually no risk to the credit owner. As such you only list your relative as an AU, you can do this by phone. You do not grant the AU access to your credit cards – just your good credit. You will need your relative’s social security number, date of birth, present address, etc. Again, you are at no risk as you are only allowing your relative to use your credit not your credit cards.
Again for the credit owner, you are at no risk of your FICO Scores being damaged by allowing an Authorized User to piggyback on your good credit. You are not authorizing your relative to be a Joint Account holder on your credit; one is merely an Authorized User with no access to use the credit.
For the one inheriting credit, you need to know the relative you are asking to let you piggy back on their credit has very good credit. By this I mean they have at least a FICO Score of 720. Inherited credit is a double edged sword, if your relative does not have high scores, this method is of no benefit for you. If your sponsoring family member runs into a credit catastrophe, you will no longer wish to be an Authorized User on their accounts. It will take a month for the Authorized User status to be extinguished on your credit reports.
Finally, you should understand that method will do little good for getting approved for major credit as this will only help improve your credit scores, it will not improve, alter or age your credit history.James Spray, RMLO, CNE, FICO Pro CO LMO 100008715 | NMLS 257365 | August 2, 2010 | Updated February 17, 2018 Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct. This information is not legal advice and is for guidance only. You may use this information.