If you are reading this article then we are assuming you already know what tradelines are and how they work. We wanted to take a moment to talk about some perspectives from a point of view that are not immediately obvious to the general public. Selling tradelines or piggybacking is a controversial topic, so much so that many people ask the question “is this even legal?” The question of legality is a clear and resounding yes it is legal as this has already been challenged in court. You can just google “is piggybacking legal” and you can read about various instances where it was challenged in the legal system and proven to remain legal.
So perhaps the more relevant question is “is piggybacking or buying / selling tradelines ethical?” Ethics obviously comes down to opinions and you will often find a wide spectrum on where people reside on their opinion regarding the ethics of buying / selling tradelines. Perhaps it is fair to assume that the majority of the public may view tradelines as unethical but are there valid points from the less popular position of suggesting that playing the tradeline game is perfectly ethical? This article is being written to show some of the points and arguments favoring the use of tradelines.
First, let’s identify what the perceived problem or risk is with tradelines. I am guessing the main argument against tradelines is the belief that people are artificially boosting their credit score and as a result can obtain credit that they otherwise would not have been qualified for. Let’s assume this is the biggest concern and biggest problem and reason to be against tradelines. So, there are really two elements here: (1) artificially boosting a credit score (2) people gaining access to credit that they otherwise would not have had access to.
Let’s deal with these two issues individually.
Here is a million dollar question: Is it unethical to take an action within the legal limits of the law that can positively affect one’s credit score?
Aside from tradelines, there is manipulation of credit scores going on all the time on a massive scale. For example, if someone applied for a loan at a bank and they got denied credit, the bank is required to tell the consumer why their credit application was denied. It may list several reasons such as credit score was too low, maybe debt utilization was too high, or maybe they just did not have enough credit history.
In the case of their debt utilization being too high, let’s assume all their credit cards had utilizations above 50% and then the consumer borrows some money from their sister and pays down all the balances to the 15% utilization mark, re-applies for the loan, the bank pulls a new credit report and sees the credit score jumped by 30 points and then the person is granted the loan. Did they just manipulate their credit score? Is that unethical?
Next, let’s consider this example. Someone’s son or daughter just turned 18, has no credit whatsoever and wants to apply for a car loan. When they apply for the loan they find out they do not even have a credit score at all. So naturally mom and dad want to help so they add them to two of their oldest credit cards as an authorized user and all of a sudden their credit score goes from non-existent to a 730 credit score! Guess what…. Loan is approved!! As a side note to this example, the parents did not intend to give their son or daughter access to that credit card. They only did it for credit purposes. Is this ethical or not ethical?
Last example on this topic. A husband and wife have been married for 30 years. The husband was the bread winner so he worked at a job while his wife was a home maker who raised the four kids they had together and she never had any credit cards in her name. She applied for a loan at the bank and got denied. Then her husband adds her as an authorized user on several aged credit cards, her credit score shoots up, and she then gets the loan. Is this ethical?
In all of these examples did they manipulate their credit score for the purpose of getting a loan? Would they have been approved for these loans without taking these actions which ultimately affected their credit score for the better?
The point of these illustrations is that it should be clear that people change variables in their credit profiles in many different ways, often for the purpose of having a positive effect on their credit score. So is the very act of purposefully changing a variable in one’s credit file for the purpose of positively affecting their credit score unethical? People pay down their credit cards to change their utilization ratios, open new credit cards to show more open lines of credit, pay off collections, and the very banks who issue these credit cards openly promote the idea of adding their kids to their credit cards as authorized users to help give them a credit boost early in life. So it always comes down to where do you draw the line?
The information above are just a few examples out of the many ways that the general public regularly takes actions to purposefully change their credit score, and most of these methods are completely acceptable and sometimes even promoted by the banks who are issuing these loans. And, in all these examples people gained access to credit that they otherwise would not have had access to. Were all these people unethical? Is it unethical that most banks openly promote parents adding their children to their credit cards as authorized users strictly for the credit boost?
Or if a credit score is such a fickle metric that is being manipulated daily, is it unethical that banks are basing their underwriting decisions on such a weak variable? Or is the whole credit scoring model completely flawed and is it unethical that the credit bureaus have successfully sold all the banks on relying on their credit scoring models to base underwriting decisions on?
Back in the 2006-2011 mortgage meltdown, who was more unethical- was it the consumers who applied for a no-income no asset loan and then defaulted or was it the bank who offered that loan? I think most agree it was the banks at fault.
On March 5, 2010 the Divisions of Research & Statistics and Monetary Affairs group within the Federal Reserve Board published a 32 page report regarding their findings on Piggybacking on other people’s credit. In the report they share statistics they gained using a large nationally representative sample of individual credit records of approximately 300,000 people across the US. It turns out that over 33% of all the people had authorized user accounts in their credit profile and coincidentally, those authorized user accounts were of better quality than their primary accounts they had under their name. So essentially, this suggests that over one third of our entire nation is benefitting from piggybacking one way or another. Another point worth mentioning is minorities tend to have less authorized user accounts benefitting them when compared to whites.
So is one third of our entire nation doing something unethical by adding tradelines to their credit profile? What percentage of the population has knowingly changed a variable on their credit report to try to increase their credit score? As consumers, we are encouraged to “build” our credit and to follow the rules and suggestions we learn about in attempting to get a high credit score. From day one as a legal adult, banks recommend that we ask our parents to add us to their credit cards as authorized users in order to give us a credit boost in life. But what if we were not fortunate enough to have parents with good credit to ask this favor from? Would it be ok to ask a friend? How about a neighbor? How about a business partner? How about a boyfriend or girlfriend? What about buying one? How much of a material difference is there really in purchasing one when compared to many other ways people get added to cards as authorized users? Is a consumer more loan worthy if their aunt added them as an authorized user versus the consumer buying a tradeline online?
In terms of banks giving out loans, we have already seen what they are capable of on that topic. They have not been known to be the most ethical institutions on the planet. To the contrary, their greed has had the ability to cause America to experience what has been dubbed “The Great Recession” which brought down the entire global economy. And much of that outcome was because banks loaned out billions of dollars, largely based off an arguably unreliable credit score as opposed to what really makes sense, which is making consumers prove they have the ability to repay. So is it more unethical that a consumer played the credit score game by legal rules available or is it irresponsible for banks to loan people money who cannot afford to service those loans? When was the last time a bank asked you to prove your income when you applied for a credit card? Did they even make you prove that you have a job? If banks do not verify income before approving someone for a loan, is that unethical?
Where does the real problem lie? Is it that banks make business decisions to have guidelines that are so loose that sometimes the wrong people get loans who do not repay? Is the credit scoring model outdated and flawed? Or is it the consumers fault for finding legal loopholes in the credit scoring / financial system. Or is it some bigger regulatory institution’s fault for allowing legal loopholes to exist?
We are not here to provide the answers but rather to increase awareness of the situation and to provide points that are not necessarily obvious to the average person whose knee jerk reaction is just to think it is automatically the consumer who is the problem when in fact they are just joining the ranks of the other one-third of our nation who has somehow acquired a superior tradeline into their credit profile through some option they had.
This article is copyrighted by Tradeline Supply Company, LLC and any use is strictly prohibited without prior written consent to use. 12/8/2017