I just read a fascinating article in the New York Times titled: "What’s Behind Those Offers to Raise Credit Scores".
It details some of the tactics that companies are using to artificially inflate individuals credit scores, including piggy-backing on stranger’s loans. This practice, using "seasoned primary accounts", attaches an individual with poor credit to a loan just as it is paid off and closed. Positive credit score improvement flows through to the individual with poor credit within 30 to 45 days. TradeLine Solutions, one of the companies selling this service, charges a $1,399 fee, for one loan, piggy-backing on additional loans, costs more, but they give you a discount with each additional loan.
Regarding the legality of the practice, TradeLine’s CEO, Ted Stearns, was quoted in the article thusly:
The program’s concept, he said, is similar to someone’s buying a car and taking over somebody else’s car loan or lease account at the time of purchase — except, in this case, there is no balance on the account. The original borrower is unaware that a new name is being attached to the account, he said. Mr. Stearns defended his program. “I am a legal entity that conducts business throughout the state of California and the entire continental U.S.”
Re-read the fourth and fifth lines carefully: "The original borrower is unaware that a new name is being attached to the account".
Does anybody else find that statement frightening?
A similar "loophole" to using "seasoned primary accounts", is in the process of being closed by the major credit bureaus. It involved adding individuals with poor credit to credit card accounts owned by individuals with good payment histories as "authorized users". The new authorized user would pickup the positive benefits of the account in good standing.
When a number of lenders complained about the practice, Fair Isaac (the company that developed the credit scoring system) changed their formula so that authorized users no longer receive benefits to their credit score.
The big takeaway from this article is that these services are in a very gray legal area. While companies such as TradeLine insist that they are not breaking any laws, Credit Bureaus and lenders view the practice as a form of loan fraud.
While it may be tempting to engage a service like this, you can raise your score naturally, and legally, over time. I detailed some steps in this post: Seven Ways to Improve Your Credit Score.